Flipping America 185, The HarvestFlipping America

Expected Air Date: 9/10/18

Opening

Results in real estate are predictable. You get out what you put in. You reap what you sow. And if you want to enjoy the harvest, you need to plant the crop.

Real estate investing is like the weather – it’s always changing. But it’s unlike the weather in that you usually have to wait more than 5 minutes to see the change. With real estate, a multi-trillion dollar industry in the United States, you have multiple impact points each with their effect, but individually are like using a bumblebee to steer a barge into port. Example, Compass, opening a new office in Atlanta, talking about their use of proprietary technology to dominate the realty brokerage market. They will no doubt gain market share because of their deep pockets. But will they dominate? Unlikely. They represent a generation of investors enamored with technology and blinded by their own preference to machines over human interaction.

But the entire company misses the point. Real estate sales require presence, that presence requires supervision, the supervision requires a trust, a set of ethical guidelines, enforced by a regulatory agency and ultimately there are licensed people – Realtors. When people are involved both as buyers and as representatives, relationships matter more than technology. Compass will survive, but will disappoint investors unless they master the people side of this. And their effect on the real estate market? Negligible at BEST. Most likely it will go completely unnoticed by most.

Larger impact is seen through the activity of the government: interest rates, policy change, taxation.

Interest rates: Direct impact on affordability and home sales.

Policy Change: Example: loosening of capitalization requirements for lenders – more money and more creative loans available.

Taxation: The tax laws passed last December have significantly affected home sales in the more expensive markets. Prices are dropping up and down the eastern seaboard. Soon to follow will be the luxury market Chicagoland and the west coast.

We are tracking the changes, the impact points, and are sharing with you on what is becoming the fastest growing real estate show on the air. Today we are going to talk about the hot new markets in flipping houses, the decline of returns in flipping houses, a new bill in congress designed to ultimately eliminate Fannie Mae and Freddie Mac, and one of the MOST important factors millenials use when deciding to buy a home. This plus many of your questions coming up.

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Call our National Comment Line: 404-369-1018, ext 1. Leave your message or your question.

Announcements:

September 12, Chantelle Owens at Flipping Atlanta, Tax Liens
FlipStarter October 13, Atlanta, GA
Lunch with me every Wednesday.
Flipping America App is in the app store. You can listen to the show, read the show notes, and the entire catalog of shows is now available to you. It’s a free download and there are no upsells or in-app purchases. Free to download, free to listen. Go ahead and give it a try and drop me a line and let me know what you think.
Want a quick analytical tool to tell you how strong a potential fix and flip deal is? Download the Property Grade app. You answer 10 simple questions about the property and the app instantly tells you what you can expect to make, your return on investment, your return on cash, and then the program gives the project a letter grade using the proprietary Flipping America Investment Property Grade algorithm.

News!

Topic: The Harvest.

Bring in this years crop between now and December.

Plant the seed for next year in November and December.

Comment Line calls and Questions

Call 404-369-1018, press 1 and leave your message!

Emails:

Questions@flippingamericaradio.com Tell us where you’re from!

Candace, Boulder, CO, “The market here for buying a flip house is intensely competitive. I’m wondering if I should move to another area, buy deals with less profit, or try a different strategy.” When asked “what strategy she had in mind” she replied “lending.”
Orville, Villages of Ocala, FL “I am an accredited investor and heard you mention a fund you were involved with. How do I get more information about it?”
Carson, Jacksonville, FL “A friend sent me a copy of your talk on analyzing market trends and all I can say is thank you! This talk encouraged me to look into a different market over the weekend and I already have a new project under contract. What are the early signs of an area turning around?”
Ophelia, Tampa, FL “I bought a couple of rental properties from one of those national gurus and instead of cash-flowing $200-300 per month, I’m actually losing money on them, when you add up all the extra expenses each year. What am I doing wrong? They told me these were good deals. I can’t afford to lose money each month.”
Fernando, Austin, TX “I’m having a hard time understanding the rates and terms of hard money lenders. Everyone is different and the terminology is hard to follow. I think I understand LTV, but I thought the loan would be a percentage of the ARV. It’s something different – a lot less. And what is LTI? I’m like “well sure, yeah of course” with the lender because I don’t want to look stupid, but I’m not sure what we are even talking about.”

Motivational Thoughts for the day

Expect problems and eat them for breakfast. Alfred A. Montapert

Transcript

[0:00] Music.

[0:28] Thanks for flipping America the show that teaches you how to make money in real estate wherever you are whatever your situation there is an opportunity for you.

Flipping America is brought to you today by Braswell Capital Solutions commercial lending made easy on the web at Braswell Capital solutions.com.

And now here’s that flipping America guy Rodger Blankenship.

You know real estate investing is like the weather it’s always changing but it’s unlike the weather and that you usually have to wait more than 5 minutes to see the change.

Was real estate.

Which is a trillion dollar industry in the United States you have multiple impact Points each with their effect but individually.

I like using a bumblebee to steer a barge in the port.

For example big news in Atlanta Georgia over the past few days Compass which is a high technology

basically real estate brokerage they’re opening a new office in Atlanta they’ve got hundreds of millions of dollars behind them and proprietary technology and they want to gain a 20% market share of the Realty brokerages in Atlanta and they want to Diamond

this Market.

[1:46] They will no doubt gain market share because of their Deep Pockets but will they dominate I say unlikely.

This company represents a generation of investors enamored with technology in blinded by their own preference to machines over human interaction but the entire company misses the point.

Real estate sales require presents and that presents requires supervision the supervision requires Trust.

And Trust comes from a set of ethical guidelines enforced by a regulatory agency and ultimately there are licensed people.

[2:27] Realtors.

When people are involved both as buyers and representatives of that trust then relationships matter more than technology.

[2:39] Compass Will Survive but will disappoint investors unless they Master the people cited this.

And their effect on the real estate market as a whole negligible at best.

Most likely it will go completely unnoticed by most of the population.

Now that’s an example of a bumblebee if you want an example of a tugboat that has a real chance of steering the barge here.

Think about the activity of government interest rates policy changes and Taxation

just as an example interest rates this has a direct impact on affordability.

And that goes to home sales and ultimately home sales will affect prices and prices affect people’s confidence in the market and confidence in the market drives everything.

[3:34] Policy change.

Pearson example last spring president Trump signed a bill that loosen capitalization requirements for lenders which meant more money.

And more creative loans possible and banks are some of the smaller banks anyway or doing some things that are different that a few years ago would have been

unheard of are those activities and increased lending things are they good or bad it’s hard to say it’s probably both good and bad in some ways but

the point is I policy change can have a significant impact on what goes on in real estate taxation is another area where the government can be the tugboat steering the barge the tax laws passed last December have significantly affected home sales

in the more expensive markets prices are dropping all up and down the Eastern seaboard.

Soon to follow will be the luxury Market in Chicagoland and the west coast is going to feel this as well prices are going to be in to come back as luxury homes get harder and harder to sell because.

[4:36] Potential buyers are taking a look at the impact of.

The caps on what they’re able to write off in terms of mortgage and deductions for Real Estate.

Texas no here at flipping America we’re tracking the changes in those impact points and we are sharing with you.

On what is becoming the fastest growing real estate show on the air today we’re going to talk about the hot new markets and flipping houses and yep there some changes there.

We also going to talk about the decline of returns and flipping houses and there’s a new Bill in Congress designed to ultimately eliminate Fannie Mae and Freddie Mac

we’ll talk a little bit about that and what are its chances of passing and one of the most important factors Millennials use when deciding to buy a home so if you’re out there and you’re investing in property the say you’re doing a flip and you think that your buyer may be a millennial you need to keep

this one factor in mind these items plus a few others plus many of your questions are coming up in just a few minutes.

Let me tell you how to get in touch with this here.

[5:45] Where on the web at flipping America network.com or on Facebook look up flipping America media follow us on Twitter and Instagram at flipping America we have.

Just a ton of stories that we don’t have time to and I honestly most of them we never even intend to because we know there just isn’t enough time but we put a lot of interesting stories into the social media feeds.

Particularly follow us on Twitter if you want to be able to click on the links follow on Instagram if you want to see the pretty pictures and then we’ve got a YouTube channel and we’ve got a LinkedIn.

[6:18] Profile and Google Plus in Pinterest and we’re all over social media but some of you don’t do social media that’s okay if you have a question or concern about real estate.

[6:30] I want you to write down this healed email address and always keep it handy because anytime there’s a question about real estate you can send it to us and get your question answered the

email address is questions at flipping America network.com that’s questions at flipping America Network

dot-com we answered 100% of the questions that come in we always have and we always will

if you don’t want to do email or just can’t do email that’s alright please call us at 404-369-1018 extension 1 leave your message that’s our national comment line 400-4369.

[7:08] 1018 extension 1 week Thursday September 12th.

Chantel Owens is going to be at flipping Atlanta Chantel is the queen of tax liens if you ever wanted to know something about tax liens and get your questions about it answered.

And you’re in the Atlanta area you need to make it out this Thursday evening to hear Chantel I’ve had her on the show she was terrific she’s a great individual a wonderful communicator

and there is so much that can be done with tax liens if you know what to do you can buy properties you really can you can buy properties for pennies on the dollar.

But you need to know what you’re doing you need to know where to look and what to look for and how to run numbers on.

The properties that you’re looking at and what the consequences are in you know mentioning this to the other day someone mentioned a cat back with me and said yeah but doesn’t that mean that.

[8:04] You have this property for a year and you can’t insure it that it doesn’t mean that at all that’s not true that’s just a rumor that’s out there you do have an insurable interest in the property and.

It’s not always a year that it depends on the municipality and the type of tax sale.

And Shantel can break all of that down this Thursday night Go to meetup.com flipping Atlanta and get more information.

[8:26] Music.

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[10:27] Music.

[10:43] Okay my friends we got some other big news coming up October 13th October 13th.

Is the next live flip starter event flip starter is coming back to Atlanta Georgia this is our

getting started event if you’ve ever thought you wanted to flip houses like they do on TV never remember we don’t encourage everybody to drop what you’re doing and do that but if you ever thought that you wanted to

Flint starter is where you need to be it’s in

it’s in Atlanta Georgia October 13th right now there’s an early bird special going on and you can get into this event for $97 but the price is going to go up over the next few weeks $97 you can get into

flip starter October 13th in one day I’m going to make some promises first of all here’s a promise.

[11:30] I’m going to be there myself now of course you know no one really knows the future but you know if we’re still alive and kicking and.

You know if there’s any way possible I’m going to be there myself in fact I plan to teach the entire thing I’m going to be there for all 6 hours we’re not going to send some speaker that we’ve hired

but the flipping America guy himself will be at flip starter and my commitment is to always be a flip starter where every we do we do the event and so I want to invite you to come come on out and

and meet me and when you do tell me you heard about it on the show and I want you to tell me what you hope.

Your flipping career is going to look like I’m going to make some promises to you aside from the promise that I’m going to be there.

[12:19] I promise you that you cannot get all of the information you need about flipping houses in one day.

So I promise you we’re not going to do that

all right I know that may sound a little disappointing but actually we want to undersell and over-deliver so I do promise you that we are going to give you enough information to go out and get started

and to set up your entire business we’re going to talk about how to.

Find the deals how to recognize what is a deal how to run the numbers on the deal and how to buy it how to structure it how to put it together how to sell it how to create your business and how to setup your business for growth

and scale so

you’ll be able at some point to step back and watch other people run this business that you created and benefit from it all that it’s in 1 day and 6 hours now admittedly where we’re going to give you the highlights or promises we can’t tell you everything we couldn’t tell you in 6 hours there just isn’t enough time

but in 6 hours we can give you the highlights and the outline for everything that you need

coupled with your motivation and your inquisitive mind you can go out and find out everything else you need to know you never need to take another course you never need to do anything else

just get the flip starter.

[13:41] Now I know that some of you will want to go further on and there is a mentoring program that we have available it’s an invitation-only program but we’ll be talking about that as well and.

True to our style here at flipping America this is not one of the high price to Guru you know.

[14:00] High pressure.

Seminar sales blah blah blah it’s not one of those things that all we intend to give you the information that you need at flip starter and if you want more you want coaching you want some Hands-On training you want to access the funding then there other opportunities there and if you convince us that you are worthy

then you can get invited into that program as well but you have to be invited in

and one step to getting invited in is to connect with us either by coming to flip starter or clicking on the free strategy button are the strategy button on our website and

I’ve been told I don’t mention this enough and I apologize for that but if you go to flipping America network.com

at the top of every page or nearly every page there is a blue button that says click here for a free strategy call with us.

[14:49] No I don’t want you to take this lightly we have operator standing by who are trained and ready to ask you questions about what it is you want to accomplish with your real estate investing career

what are your goals what are your dreams what are your aspirations what are your needs for training

what training have you had how can this all get put together this is a free no cost no obligation 30-minute call and anyone can.

Access this and call it now here’s another little thought for you I still take a significant number of these calls

yeah some of these calls will come to me I like to spend time on the phone talking with investors around the country and finding out what’s going on and are not always investor sometimes investor wannabes

that’s okay I love to do it and so if you click the button you may actually end up talking to the flipping America guy directly and I know what a thrill that’ll be for you just ask my wife okay anyway.

[15:50] So

where was I I was talking about flip starter yeah you need to connect with us if you want to learn how to flip houses and listen if you want to be in a real estate investor and you’re not listening to this show I don’t know what you’re thinking

because you can get most of a complete education in real estate just by listening to this show said in my own humble opinion.

[16:12] Alright what are there now supposed to be have hey if you’re in Atlanta on Wednesdays

and you want to have lunch with us then we want to invite you out every Wednesday.

We do lunch somewhere right now we are kind of going to the Huey luey’s Mexican restaurant every Wednesday

and that’s on Roswell Road in Sandy Springs just north of downtown Atlanta if you need directions or information please hit the website meetup.com flipping

Atlanta and flipping Atlanta is our local Meetup affiliate and I will be saying some more about that we’re doing some things with the meetup.com we got a call at them later on today

to discuss what the possibilities are and how we can improve the

flipping America presence on meetup.com so you’ll be hearing more about that and so much more is in the works and

what’s happening behind the scenes here is exciting it’s a little scary and it definitely invigorating and motivating and it’s hard for me not to just spill the beans and tell you all about it but I can’t yet.

Because Neil papers haven’t been signed but things are happening folks things are happening just stay tuned.

We’re going to go to a break and when we come back we’re going to do the news and I’ve got I’m going to share with you some of those things that we talked about at the beginning of the show and I’ve got

Apollo questions from you and thank you for those and we’ll get to as many of them as we can right after this.

[17:39] Music.

[18:00] Do you want to learn how to flip houses I want to show you how to flip houses and there’s probably no one in the country better qualified than me to show you I’ve looked hundreds and hundreds of them.

And I also have some training and degree and experience and education so I could show you how to do exactly what I’ve done hundreds of times don’t believe me.

Head on over to put starter event.com but in the meantime Give a listen to Pat caywood.

[18:26] Cleveland Tennessee and I’ve been.

Doing some flipping since about March of this year and had started with a Nationals program that was very expensive I spent today with Roger Blankenship.

Learning about his program and boy do I wish I’d met Rodger first.

He has a clear concise program and many tools that are going to be very hot.

[18:54] And starting and managing a program and the mentorship and Leadership and coaching that he saw frame are in value.

[19:04] Music.

[19:56] Got to know during the break reminding me to tell you about the flipping America app

if you haven’t downloaded the flipping America app yet it’s in the App Store it’s free free to download free to listen go ahead give it a try and drop us a line and tell us what you,

and if you want a quick analytical tool to analyze how strong a potential Fix and Flip deal is we have another app in the store called the property grade app you answer 10 questions about the property and it instantly tells you what you going to make.

You return on investment you return on cash and then using our proprietary flipping America property grade algorithm we give you a letter grade which is easy to understand and tells you the relative strength of your deal.

All right let’s do the news.

[20:38] Music.

[20:44] I’m going to send you a link to a story I picked up from CNBC where they are interviewing representative Jeb hensarling God of Texas and he’s talking a little bit about Fannie Mae.

Freddie Mac and Ginnie Mae and he finally has a Democrat co-sponsor of a bill to.

Basically phase out Fannie Mae and Freddie Mac in favor of Ginnie Mae and he talks about why and it’s it’s an interesting little conversation.

And if it happens I think it would be a good thing just being honest with you because Jenny May is a better platform then either Fannie or Freddie and Fannie and Freddie you know both have been contributors to the problem.

The led to the I don’t say they’re responsible for the crash but they were definitely contributing factors but.

I just have a little bit of an issue with the risk involved in what’s going on in Fannie Mae and Freddie Mac and I agree with representative and starling

about the idea that the federal government does not need to be guaranteeing loans.

[21:52] What is the chance of the Bill’s passage I would say slim to none

but I appreciate the effort none-the-less and this is a message that probably needs to get out there people are not going to look at it as one of the burning legislative issues of our time but.

It is important to inject as much free market into the market as we can and.

[22:16] You know my issue with Fannie and Freddie have more to do with the fact that they are basically just government-funded monopolies and they are private organizations they are not part of the government but they are government-funded monopolies I’m not even

so sure I’m in favor of that with the National Football League and Major League Baseball but when it comes to something as important as Banking and money definitely

we should not be funding monopolies so check out this issue for yourself and get informed let’s make a switch now over to the hot.

Hot markets for flipping houses one of the hottest markets for flipping houses is in a new study Washington DC

and then also you need to be thinking about Nevada I know a lot of people are Tennessee Arizona and Maryland but some of the surprising zip codes that are really getting hot are

just outside of McAllen Texas in the city called Donna Donna Texas you also have super hot zip codes.

In two different Long Island cities surprisingly

Birmingham Alabama and Memphis Tennessee these cities may not be on a lot of house flippers Radars but you know if you are thinking about flipping houses and

maybe your price out of your Market one of the reasons Birmingham is hot is.

[23:41] A lot of Atlanta investors just can’t find enough inventory in birmingham’s you only depending on which part of metro Atlanta during 2 or 3 hours away so you can make it over there spend the day for some I’ll just make some money and come back.

[23:55] Definitely worth considering in a related story from Adam data we are learning that.

[24:02] Gross profit from flips is starting to Trend down a little bit nothing to be alarmed about but the gross profit is.

[24:14] All over second quarter of 2018 is 65000 520.

Down from 69500 in the first quarter so it’s down a little bit I don’t know if I’m going to worry about that too much but it is at a two-year low and some of your thinking $69,000

you can make that flipping house while listen this is the gross profit okay and I look carefully at the criteria in the story and this is

basically just a comparison of the sales price

when they bought it in the sales price when they sold it and doesn’t say anything about what they put into it or they’re holding cost or the cost of the money.

My guess is based on average numbers these people are making 15 to $20,000 at most and so you can now you can start out by saying 15 or $20,000 well that sounds terrific it is

it’s a terrific business to be in if you know what you’re doing but 15 to $20,000 is not a lot of.

Prophet when you consider the enormous risk and under taking a rehab.

Because there are so many unknowns so many potential gotchas it’s not hard to make a $10,000 mistake and that’s why.

Many people try this not all of them succeed.

[25:35] It’s just the nature of the game and it’s like I said before probably on the at least half of the shows that we’ve done this being show number 185 I said it’s not for everyone.

But it is for some and if you can manage the process you can do really well just know that there’s a little bit of a trim down that’s the news on that.

When you think about selling a house you going to be selling starter homes to Millennials Millennials have started buying homes and they finally entered the marketplace but what are they buying well they’re buying the homes that you think they would buy with this one catch.

For Millennials one of the most important factors when they buy a home is there pet yet.

[26:23] They have a pet.

And 79% of pet homing pet-owning home buyers who closed on a property this past year said they would pass up an otherwise perfect home if it didn’t meet the needs of their pets.

Alright folks I just have to admit that this is a view of pets I don’t understand.

Probably never will understand I grew up in a generation where pets were at the best service animals and there was never any consideration in my home growing up we always had a dog and we usually had some cats.

They never ever ever came in the house I don’t know why it was just the rules and to this day.

My mom and dad think it is so strange to allow a dog in the house they think that is the weirdest thing ever

and of course you know I live in a building where it seems like

every other person has a dog in this is at a high-rise building in Downtown Atlanta and so we share the elevators with dogs all the time we see dogs in the restaurants and dogs on airplanes and dogs everywhere and it’s just become a a a different world in the way people feel about their animals is a

family member and so forth it is a little bit foreign to me I must admit.

[27:41] But making a home buying decision especially in the market is tight as this based on a pet that is a mystery to me but I share it with you because

it’s not what we wanted to be it’s not what we are is what it is and what it is folks is the market that you need to sell a house in so you need to make sure that you have a pet friendly at home to sell to Amazon.

[28:02] Music.

[28:11] Are you one of the 70% of Americans living paycheck to paycheck and tired of the stress if so I understand it I used to be in that 70.

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Hey flipping America listeners have you ever walked into her property and said I have no idea what it will cost to repair this home.

[28:48] Music.

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[29:39] Music.

[30:19] And we’re back I’m Roger Blankenship the flipping America guy and I teach people how to make money in real estate.

[30:28] We don’t encourage everyone to drop what you’re doing and start flipping houses like they like you see on TV but we do encourage everyone to consider real estate as a part of a balanced.

Investment.

Portfolio you want to know where you need to think about buying your next investment property on new study from Harvard says that you should buy.

In any town after a Starbucks has opened yep you know.

For some reason I’m thinking that this is a year old story I bet I did I checked and double-checked in this is a new study but I think it’s probably just a confirmation of the study that I’ve seen before but the Harvard study says that.

It uses Yelp data and when a Starbucks store opens up.

It’s followed by a .5% increase in housing prices within the next year now.

I do appreciate the fact that in this study they distinguish between.

A correlation and a cause and effect you see when there is a correlation my friends it’s not always a cause and effect.

And they don’t know whether the Starbucks opening is the.

The cause or the effect but really they they say it’s probably neither it’s just the correlation because something in the Starbucks market research has recognized an area is beginning to Trend upward and.

[31:54] It would Trend upward whether the Starbucks open there are not but Starbucks is shrewd enough to get into the right kind of markets so what do we do with this information Well we’d Spacek Lee borrow Starbucks as our R&D Department.

You know it’s a cheap way for us to figure out where to go next all we need to do is just.

Be aware of where the Starbucks are about to open and you don’t get your buy-and-hold property there for sure if it’s an area that meets the qualifications otherwise.

[32:26] I’m going to make you one more news story and we’ve got to move on to your questions but I wanted to get this in there Diana olick has an article called Realty check

and on CNBC and she is the real estate reporter for CNBC and so it said you know it’s not unusual for her to have story there obviously but.

This story is titled it’s better to rent than Buy in today’s housing market.

[32:53] And I found that interesting some of you who have listened for a long time do the show may remember that I did a show and title the cost of home ownership

and I’ve been that show I debunk the idea that home ownership was the Great American end-all-be-all is a dream that we all should.

Strive for because most people that think they want to own a house or not equipped to emotionally psychologically or even financially to own a house

there’s so many responsibilities that go along with homeownership and so many hidden cost that I said even then that.

It would be better for you to just

rent a place that you like and are comfortable and save a little bit of money and use that excess money

that you would be paying toward the upkeep and maintenance of a house use that to invest in something and that investment is going to pay off people think that

the owning a home is an investment and I say it is not it is not an investment for a couple of reasons it’s not investment because first of all doesn’t produce income secondly it’s not an investment that you

want to be proud of because even based on the rates of appreciation you are.

[34:08] You could do much better with your money even in a balanced Index Fund but.

If you bought your house during the post-crash years and bought it cheap.

Like my daughter for example she bought a a house from a bank during the crash years and moved in and now has quite a bit of equity is that home has more than doubled in value since the time she bought it she did that that’s fine but

4 most people it is cheaper to rent than to own a house why is that.

[34:41] Fast rising home prices and higher mortgage rates have shifted the calculation

toward the rental site of think the monthly cost of buying and owning a home that you octopi are up 14% over the past year more than three times the annual increase in rent rates nationally according to realtor.com rent or just up

4% the number of local housing markets where it’s cheaper to rent than buy is growing by the day.

If you’re thinking about buying home I would encourage you to think about renting a home you may be able to find a similar home with similar square footage and your rent would be similar to.

The mortgage payment that you would make if it is similar to or even slightly more then.

Your costs are going to be less because if you’re in a rental you don’t have to pay for maintenance you don’t pay for repair you don’t pay the property taxes.

You do need to have renter’s insurance but renters insurance is far cheap

then homeowners insurance you don’t have the stress and responsibility plus you have the freedom to follow your career and move around there so many compelling reasons for renting that.

[35:58] Baffles me that.

People think that the end-all-be-all gold Financial goal is to own your own home it’s all right though remember we deal in what is in,

this is we dealing what is people want to buy houses when we’re going to continue to sell them houses.

[36:14] So let’s get on to your questions and see how many of those so we can answer today.

Candice from Boulder Colorado to Market here for buying a flip house as intensely competitive

I’m wondering if I should move to another area by deals with less profit or try a different strategy so we thought up and when asked what strategy she had in mind she replied lending okay.

That’s good she’s thinking.

And Candice we applaud you for thinking about it and we did confirm you’re not talking about physically picking up and moving you’re talking about moving your

flipping activity to a different area unfortunately for you and Boulder the only about the only places within reach that makes sense to get involved in flipping is Denver and Denver is every bit as competitive maybe more so than Boulder.

Shalinda is a good alternative when you are loaning money for certain precautions that you need to take and.

[37:11] We willingly help you out with that by giving you some guidance on the documents that you need to make sure that your investment is protected but we talked a little bit about returns when you’re

when your lending money you it’s you can probably loan your money privately for maybe

two to three points and 10 to 12 points to three points in,

do the three points in origination fees in 12 points for interest and what is that going to mean to you in terms of returns well we’ve got a break coming up

and I don’t have time to get into it before we get there but when we get back we’ll talk about what

what is this translates to in terms of numbers because lending can be a very good alternative to actually doing the work yourself.

[37:59] Music.

[38:08] Not too long ago we did a one-day flip starter in Chattanooga Tennessee and low and behold one of my old College friends came out to the event his name is Peter Faulkner and here’s what he had to say about the event.

[38:22] Peter Falkner here I tended a one-day flip starter training session led by Rodger black.

And I was amazed to see what has happened in Rogers Live from the last $15 plus years flipping over 800 houses and then this one day training he told how he did it and what.

Balls the blessings the benefits and how to do it and I was so impressed with how well organized and how smooth the training winners today.

You’re tempted or in courage to go go at was not a bad price and if you get a chance to do it even just to consider investing.

But I just want to thank Rodger for a great day today and appreciate what he’s doing.

[39:07] Music.

[39:21] So if you have money to put into a real estate deal and you’re having trouble finding a deal maybe you can become a financial partner for someone else doing a deal then we break down a little bit more about how this works we talked about let’s say 2 + 12

if you make a 6 month loan at two points and 12% then.

Really what you’re talking about is a 16% annualized rate of return and how do you get there well 12% of 12% the two points are paid up front as kind of an origination fee but.

The entire loan stayed out for a year then you’d be looking at the 12 + 2 is 14 but if you’re talking to 6 month and you can turn it around and Loan it out again you can get.

The two points again so that makes 16% that’s a little bit how you think about the money.

And it also helps you to understand where the hard money lenders are making their money to be honest they’re making a little bit of money on the spread because they’re borrowing money at a lower rate but they’re making most of their money on the points and the broker that’s doing the loan for you is making all of his or her money

on the points usually.

[40:30] 16% is a fine return it is a good return that you can get if you can keep the money deployed one after another then you’re going to be doing all right.

I talk to people who put their money into real estate deals and and they end up with less-than-stellar results in a lot of times there annualized net return is.

10% or less and if you’re going to do that why don’t you just take your Cash and Loan it and the common answer is while I don’t have enough cash to actually

loan on an entire deal that’s all right I have a friend

who I’m just got into a deal with $70,000 and I mentioned him on the last show and we were talking about how to set up the deal and he was providing Gap funding and now Gap funding can bring you a much higher rate of return than the 2 and 12

and maybe one of these days we’ll have to do a longer segment or maybe an entire segment on Gap funding but.

All this is to say lending is a good alternative to active flipping Orville from The Villages of Ocala Florida

I’m an accredited investor and heard you mention the fund you were involved with how do I get more information about it or will thanks for the question many have asked this question which is why we’re putting it here just so everyone will know the fund is.

[41:57] T investment funds that’s d as in delta or d as in Diana t as in Tatum

investment funds DT investment funds. Com just go to DT investment funds.com and request information there and someone will be in touch with you immediately the fund is open and

subscriptions are selling and so I thank you for your interest

and remember here at flipping America we are here to help people and one of the things that we’re doing through DT investment fund is we’re helping people make.

A good return on a passive investment Carson from Jacksonville Florida

a friend sent me a copy of your chalk on analyzing market trends and all I can say is thank you just talk encourage me to look into a different Market over the weekend and I already have a new project under contract what are the early signs of an area turning around

well Carson I’m not sure I know all of the early signs of a market turning around but I’m going to tell you some of the things that I look for and after today I think will look and see if I knew Starbucks is opening up but certainly,

that goes to a larger issue infrastructure.

[43:10] Is the municipality investing in the surrounding infrastructure if you see that in Atlanta we have here something that’s kind of locally really

well known and things very popular it’s called the Beltline they started with some abandoned railroad tracks and they connected some other things and put some walking paths that are connecting

neighborhoods inside the perimeter in Atlanta and it’s.

Jennifer walking and bicycle riding only nothing motorized and it’s become very popular and the city is investing in infrastructure around this Beltline.

[43:47] And remarkably strategic ways and neighborhoods together with private developers in private foundations

to redevelop the neighborhoods they are creating a huge wave of gentrification inside the perimeter in Atlanta it is remarkable to see so if your city has something like that where there is a renewal project going on.

Where taxpayer dollars are being spent to improve areas and when you begin to see.

[44:17] Remodelling significant remodeling the work of investors a lot of exterior work floor plans being blown out or blown up you know or houses being leveled in new construction going on in the spot when you see that happening then you see the beginning

of a turnaround in the market.

You see I don’t think that we have to spend a lot of money in market research and I don’t think that we have to necessarily be on the bleeding edge I think that we can just pay attention to what’s going on and,

we will see the signs that investing activity is happening then once you see these things we.

Dive into realtor.com or redfin.com or even Zillow and we certainly looking at the sales in the area and start tracking pricing Trends you can set up a search in Zillow and have

Zillow automatically email you.

Updates and notify you of of houses on the market and you can pay attention to price changes and Trends and Zillow has

an interesting tool if you just type in information about a particular Market they can tell you what’s going on Trend was in that market and of course we also recommend our friends at Adam data if you want to look deeper

and CoreLogic is also a good source but really the first thing I would do is just pay attention with your eyes.

[45:43] Ophelia from Tampa Florida says.

I bought a couple of rental properties from one of those National Guru send instead of cash flowing 200 to $300 per month I’m actually losing money on them.

[45:57] When you add up all the extra expenses each year what am I doing wrong they told me these were good deals I can’t afford to lose money each month

alright Ophelia my heart goes out to you and I am telling you that the only thing that you did wrong was ever listen to those guys in the first place because.

There are a number people out there and take warning everyone there are people out there.

That will tell you that if a rental property is cash flow into the $300 a month you’re going to make money and they’ll even go so far as to say is all you need is 10 of these and then you can retire comfortably are you can supplement your income or whatever

I say to you if you buy a single-family home that cash flows $200 a month you’re going to lose money.

[46:45] The only way that can stand a chance of breaking even is if you have someone move in and they stay there for 5 years or longer because the first time.

Someone moves out.

You’re going to have to go back in and paint that house and you may have to put some new carpet in and this is not something you can penalize the former occupant for this is natural wear and tear and you can’t hold back their security deposit and so you’re not going to pay for it out of security deposits withheld

you’re going to bite the bullet and pay

for that rehab to your rental property and its if you got $200 a month positive cash flow then you got $2,400 you can’t paint

and carpet a house for $2,400 it just can’t be done.

Then what if something else breaks what is the air conditioner goes out and you kind of $4,000 expense well there are some things that you can do about that but basically

this is a misconception that’s being put up on innocent people out there who just want to supplement their income and so not to you or philia but to the people that sold you this is a shame on you.

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[49:25] Music.

[49:39] Fernando from Austin Texas says I’m having a hard time understanding the rates and terms of hard money lenders

everyone is different in the terminology is hard to follow I think I understand LTV but I thought the loan would be a percentage of the arv it’s something different a lot less and what is LTI

I’m like well sure yeah of course with the lender because I don’t want to look stupid but I’m not sure what we are even talking about all right.

[50:05] I don’t know.

How much this is going to work on radio when you get into a whole bunch of acronyms Fernando but let’s do the best we can okay when you say arv we are of course talking about after repair value

this is a investor lingo okay now a lot of the lenders out there will make

alone and based on a percentage of the after repair value that’s a loan to a RV and when you and sometimes it’s shortened to LTV loan-to-value but some lenders think of the value of the property as the current value

what it’s worth in its current condition right now and so they’re going to make a loan.

Based on that value and when they use LTV when when you get surprised by the amount of the loan that’s because they’re using the current value what what is the current value of the property a lot of times they’ll do an appraisal that will

hard money lenders in Desperate lenders will do an appraisal that brings back to the lender

a current value and a future value based on the scope of work that you’ve provided in advance so that current value in a RV or both used as criteria for making the loan.

[51:20] The current value is almost always whatever it is you’re paying for it.

So if you’re paying 200,000 for the house as is and the something that you hope to rehab and sell 400,000 later on they’re going to use a current value probably of 200,000 and most.

[51:39] Not all but most hard money lenders are going to loan something like no more than 90% of current value so it’s a 90% LTV some of these lenders are advertising they have 80% LTV.

[51:54] When you have a lender that’s basing their loan on the arv the after repair value that 400000 and they say will make a loan of 65% or 70% of a RV.

Well okay but then another lender comes along and says we will make a loan of 80% LTV.

That sounds like a better deal but if the valuation they’re the value that they’re using for the property is the current value that loan is going to be far less

let’s translate that in the numbers 80% of

200000 the current value is what a hundred and sixty thousand if you’re talking about 65% of the future values that’s 400,000

you talking about 260,000 so it’s $100,000 difference depending on which value your.

Is being used and so there’s no hard-and-fast rule there’s no government agency in forcing this terminology and I don’t think there should be

it’s up to you Fernando

and all of you out there borrowers to talk to the lender and make sure you understand the terminology that’s being used and what they’re referring to and don’t

don’t don’t be like Fernando it don’t just agree and whatever and yeah because you don’t wanna look stupid you know what it’s okay.

To learn stuff it’s okay to not know everything it’s okay to be an active inquisitive learner.

[53:21] Honestly folks people look at me like I know all the stuff about real estate and you know I guess I do but you know how I found out

by asking questions and sometimes asking dumb questions sometimes asking questions of more experienced people that were so obvious to them that they gave me a look like.

[53:39] You don’t know that okay so I’m willing to embarrass myself and humble myself by asking a question if I don’t know the answer and.

[53:49] You should do the same don’t hesitate because.

After all Clarity is one of the most important things that you need in this business all right now.

LTI loan to investment or loan to Total investment sometimes it’s ltti loan to Total investment the loan to investment is.

[54:11] A ratio or a percentage of the total amount that’s going to be spent on the project let’s go back to your you’re buying it for 200,000 and you’re you’re going to spend about 60,000 in it

and the arv is 400 if you were doing an arv loan well it looks like

I know that 65% would cover all of that and it would cover 260,000 but even when you’re doing that they have

they have multiple guidelines here no lender is going to give you a well I shouldn’t say no lender but most lenders are not going to give you a hundred percent financing and some cases there are exceptions to that.

What time again it did it all comes down to the terms and conditions of the loan but most lenders want you to have a little bit of what they call skin in the game and what’s the skin

it’s the money that you’re putting down so a lot of time sell loan you 90% of the purchase price and maybe a hundred percent of the repairs

up to a total of 65% of a RV.

But in this case we’re talking about an LTI loan that’s loan to investment and the total investment is 260 they might say it

something like this we will loan 90% LTI.

[55:23] Up to you 65% of a RV okay.

You may see that and that’s a whole mouth full of letters out there but 90% of LTI what’s the I in this one in this example were using is 260000 right so 260000 * .9.

234000.

So what they’re saying is they will loan 234,000 as long as that doesn’t exceed 65% of the arv.

[55:56] In this case it does not in this example that were using that I just made up for the show so I hope that helps Fernando and,

the main thing I don’t want the reason I took this question is not to confuse everybody with more letters and acronyms and investor jargon but to let you know that you should not hesitate to ask the lender a question because in

the private money hard money World there aren’t any

you know standards established by the government for the way that these words and phrases are even used so you need to make sure that you have an understanding and an agreement about what is in writing

hi this we wrap up today I want to talk to you about the Harvest we are here in September and

it’s about time for the Harvest to begin I want to encourage you to think of it like a farmer

and folks let’s get these projects that were working on wrapped up and get him on the market because we need to get them sold by December why because January and February are if you just look at the bell curve in the end are the.

Sine wave or whatever it is it’s a graph of the sales

recycle in real estate it’s at the lowest point in January and February it’s not too bad in December believe it or not.

[57:10] It gets low in January and February so that means you don’t want to have a lot of properties for sale in January February you want to buy the

product in November and December and so you can be working on them in January February if you do this especially if you live north of the Mason-Dixon Line what you’re going to do if you’re going to buy these properties in November and December and you’re going to be spending the end of the winter months

working on the inside because there’s not a whole lot you can do outside unless you get some more days you can’t

really paint exterior if it’s below 45 degrees outside or if it’s rainy or snowy or whatever and you know.

Rainy yucky Mucky days that’s that’s.

Mid-Atlantic to New England do you know pretty much from October to March right okay I’m kind of kidding but only kinda here beautiful sunshiny warm days are rare during that time and.

[58:07] I always got a story that we didn’t get to today that about the top 10 places in the u.s. to live I’ll make a Note 2.

Get that into the next show because.

Criterion makes all the difference in the world when it comes down to the conclusions that you make in a research study.

[58:25] Hi folks get the crop in and then get your Harvest going for next year by buying up whatever you can in November December and we’ll see you.

[58:34] Music.

[58:58] Alfred a montepare said expect problems and eat them for breakfast I like that.

[59:08] This quote is brought to you by the foundation for Renewal working together with communities across this great land of hours to bring lasting impact in life change find them on the web at renewal fund. Net your gift is tax deductible and much appreciated.

[59:22] Music.

[59:32] This has been flipping America real estate investing for everyone.

If you have questions about real estate Investments send them to questions at flipping America radio.com listen every Monday at 11 Thursdays and Saturdays at 10 on stations across the country or on iheartradio.com,

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