Flipping America 570, Seven RulesFlipping America

Opening:

Here are my almost famous Seven Rules for Real Estate Investing. If you want the Cliffnotes or Sparknotes or whatever the abridged version is called these days, you’ve come to the right place. For some of you – this may be the only real estate instruction you need – ever.

This is a replay of a previously recorded show, but good enough I needed to share it with you again. Here we go.

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Topic: Seven Rules for Real Estate Investing

Buy for Less than you can sell it. Rent it out for less than your monthly payment. Know your numbers.
1. ARV
2. Rehab
3. Holding
4. Loan Constant
5. Cash on cash return.
Learn the terminology and their proper use. It’s ok for this to be an on-going venture. Don’t try to conquer this before you begin.
Recruit a great Team
1. Great Contractor – Vital piece
2. Great Realtor – Vital piece – more plentiful than great contractors.
3. Bird Dogs, Wholesalers, Marketing people
4. Staff to your weaknesses
Treat it like a business
1. Understand how a business works.
2. Focus on the bottom-line
  1. Business cards, logo design – all a form of procrastination
  2. Entity structure – important, but secondary.
Do everything at first and stop as soon as you reasonably can. End up doing only those things that only you can do.
1. You can scale systems, processes and products but you cannot scale YOU.
2. Read the book E-Myth Mastery Brian Gerber.
Picture your life in the future – 3, 5, 10 years. What is the life you dream about? Call it Vision, Goal, whatever. Terminology doesn’t matter
1. Include where you live, how you spend your days, etc.
2. Include your reputation – how many people know who you are and what do they think of you?
3. Make a budget showing how much it costs to live your dream life.
4. How much net return can you reasonably expect from your investments (real estate, stocks etc.)?
5. How much will you have to invest in order for those investments to afford your lifestyle? You are financially free when your passive income pays for your lifestyle.
Think about your legacy. It is pretty easy to make more than you really need in this business. Choose generosity as a lifestyle habit.
1. Leave your children enough to do something but not enough to do nothing.
2. Find a cause bigger than yourself – perhaps more than one. Giving makes you a better person and actually adds to your life wealth.

Quote of the Day

Today’s Michael Scott Quote:

Guess what, I have flaws. What are they? Oh, I don’t know. I sing in the shower. Sometimes I spend too much time volunteering. Occasionally I’ll hit somebody with my car. So sue me.”

Expected Air Date: Wednesday 11/9/2022

Guest: none

Transcript

[0:00] Here are my almost famous seven rules for real estate investing,

If you want the cliff notes or spark nose or whatever the bridge version is called these days you’ve come to the right place for some of you this may be the only real estate instruction you need.

Ever.

[0:19] Music.

[0:33] The show that teaches you how to make money in real estate wherever you are, whatever your situation, there is an opportunity for you. And now, here’s that flipping America guy, Roger Blankenship. Thank you, Kathy.

Hello America this is a replay of a previously recorded show but it’s good enough I needed to share it with you again so here we go.

[0:55] Rule number one buy for list and you can sell rented out for less than your monthly payment but you gotta know your numbers.

If you’re going to buy and sell, then you’ve got to know three numbers in particular. You’ve got to know your

Arv your after repair value you’ve got to know your rehab costs and you’ve got to know you’re holding cost,

What’s it gonna cost you to keep the power on and ensure it and what are the taxes gonna be while you’re holding it those kinds of things affect your,

You’re causing can be boiled down into a daily number one of the craziest things that you see on the TV shows is they buy these properties they fix them all up and then they bring a realtor in and

They say what are we gonna sell it for when I see that I just laughed no one does it that way not

Real investors you start by knowing what it is you’re gonna sell it for.

And then you calculate what the rehabs gonna be and then you back into an offer price that includes a margin for error and surprise and also your profit.

And that’s how you come up with your purchase price. You have to know your numbers. If you’re gonna be in the rental game, you have to know numbers there also. Now,

To renting properties than just your return you also get the benefit of depreciation and you get the benefit of the appreciation.

[2:21] So you have that working for you to enhance the

Still you should go for a larger return,

When you’re talking about rental properties you’re really want to focus on something called cash on cash return.

If you’re using cash and not borrowing money this is your return on the property okay it’s the same as a cap rate if you’re not borrowing money I don’t want you to get too

Worked up about cap rate right now capitalization rate is something that you will need to know and if you borrow money you’re gonna need to understand loan constant you’re gonna need to think about debt service coverage ratio your lenders are gonna help you with

Because that sort of an insider secret but you can do some research on this you can contact us with questions about loan constant we’ll help you but

I think that you just need to think about

Your actual cash on cash return

These are the kinds of numbers that you need to know and if you wanna be good at this you need to know several things about these numbers.

[3:39] Learn the terminology and their proper use. It’s okay for this to be an ongoing venture. You don’t need to even try to conquer it all before you begin but please,

Please,

Learn some things about real estate.

[4:01] When they’re building their little data file about you they’re gonna tell themselves this person doesn’t know what he or she is doing because they don’t know the terminology that you don’t have to know,

Everything,

But you do need to know the basic terminology. Learn the terminology, learn the words that you’re supposed to use, and that comes to whether you’re talking about the contract, transfer of property, or,

Learn what the parts and pieces of the house are.

And don’t be afraid to ask questions but.

Recruit a great team.

[4:42] You can’t get very far.

[4:51] You’re gonna go through some people before you get to great.

You’re gonna go through some bad ones then you’re gonna go through some good ones and sooner or later you will find some great ones when you have a great contractor and a great realtor and a great private lender then you are set,

The contractor is a vital piece that the realtor is a vital piece and honestly,

Great realtors are more plentiful than great contractors.

And after you have made them some money,

You’ll be able to it’s almost like a partnership is going. There’s an ebb and flow to the contact and realtors are not necessarily going to pick up the phone and answer your phone calls. If you’re just calling them off the street,

Because they’re gonna call if they think there’s an opportunity for them to make money. They don’t make money by talking on the phone. They make money by getting deals to the table

Part of your team also needs to include your deal finding people bird dogs wholesalers deal marketing people.

[5:57] You know, when it comes to settlement agents like attorneys and so forth. It’s good to have a good one.

In your pocket

In Georgia we use attorneys for closings and so I tried to send as much business to the same attorney that I’ve used for years he has great closing assistant and they make things happen,

And that friendship I guess he’s close probably 400 houses for me over the years that friendship

That comes out of that allows us to

Be able to do,

I encourage you in recruiting your team to staff to your weakness. That means you need to understand your weaknesses. You need to be honest with yourself about your weaknesses. You know what your strengths are. You know what the things are that you enjoy doing. You like doing in your good at and.

If someone tells you that you’re not as good at something as you think you are take their word for it and just find somebody else to do it.

As you go along just focus on recruiting a great team.

[7:05] Okay it’s just okay but it’s not good enough.

Keep on replacing the pieces until you get greatness.

Treat this like a business.

Understand how a business works.

[7:35] I see this mistake made so often people just come in here cavalierly like, okay, I’m a real estate investor. They may even go have.

Business cards printed up in different things like that.

They may have their logo and everything but they have no idea because they don’t have a plan.

[7:57] How do you get to the bottom line in the real estate business it’s with deal flow.

Business cards and logo design and and all of those kinds of things are all just a.

Fancy form of procrastination you’re putting off getting to the real thing.

Into destruction that’s important yes it is but it’s secondary you you don’t need to,

Structure before you have any deals. So, you don’t need to set up this complicated structure for asset protection. If you have no assets, it’s okay to do a little bit of that. As you go along and as you grow,

You need to understand these things and eventually you’re gonna need business cards and you may even wanna logo in a forward facing or or a community facing website. But you don’t need these things to begin with. What you need to begin with

Is deal float?

An office. You don’t need a fancy office. You just you may need a place to sit but you may be able to work out your car.

The trappings.

[9:12] It takes about 20 or 30 offers to get one deal accepted,

Now how many offers do you want to be accepted in a month most people would like to do one deal a month

I think that’s really ambitious when you’re starting out and you’ve gotta have some cash in order to pull that off but if you wanna do one deal a month that means you must offer,

You may make one offer a day every day and if you wanna take Saturdays and Sundays off then that means you need to double up

My thought is you should probably plan on making two offers every day

Two offers on Monday two offers on Tuesday two offers on Wednesday two offers on Thursday two offers on Friday have you made your two offers today.

[10:01] You’re gonna get told no a lot

Get used to it prepare for accept it that’s fine it’s a numbers game know what the numbers are keep track of how many offers you make the ratio between offers made and offers accepted,

Because then anytime you want to scale it up you’ll know exactly how many more offers you need to make in order to get your

Your goals and your targets. And how many pieces of property do you have to look at in order to make an offer? Keep track of these numbers. I would say that you’re probably gonna look at 100 properties to make 20 offers and get one accepted.

So if you have to look at 100 properties,

What do you have to do to build your network up so that you have 100 properties coming in to look at all of this is how a business focuses on the bottom line.

[10:50] You can go back even further if you want to you can think about your income targets your income targets may be $10 thousand a month in rental income,

And $20 thousand a month in flipping

Ultimately, you’re going to need 12 to 15 rental houses. To pay you $10 thousand a month. Now, that’s paid for rental houses. If you have leverage on them, then you’re gonna need far more than that.

[11:20] So

[11:28] Music.

[11:37] Hey are you ready to learn this business for real.

You wanna check out the Flipping America Mastermind,

Group coaching calls for life and monthly one on one calls for a full year,

Invest in yourself and be a part of my flipping america family for life flipping America. Net forward slash mastermind.

Now on this show today we’re doing my seven rules of real estate investing,

And.

These rules probably have a lot of subcategories and other things we could talk about but I’m just boiling them down to the essence right now and so here we go. Rule number.

Do everything at first.

And stop as soon as you recently can.

[12:47] I’m gonna say that again.

Get that book read that book,

This is how you scale your systems and processes and products.

If you make the entire thing dependent on,

You will not be able to grow your business,

I do not say and suggest that you should become a bookkeeper not that’s not what I’m saying what I’m saying is you need to speak with your accountant

Keep some good dog on records.

Point you to a bookkeeper who can get it all in the right format so you can get your tax returns done but don’t you try to be a bookkeeper if you’re not one. Alright.

[13:58] If you can paint, fine. If you cannot paint, then don’t,

But if you can paint I mean when I started out in this business I did everything I painted I did carpentry and electrical light I like to go light plumbing.

It took me longer to get a house finished because I’m not a pro at any of those things and.

[14:20] Kind of slowed me down and and my volume necessarily was low because it was just me doing it. I even did the for sale by owner. I was a complete do it yourselfer to begin with. And I read this book,

And I was already thinking this anyway but.

Not only that i needed to but how to transfer these duties to someone else as soon as I could

So, it started by hiring a realtor to sell the houses. Boy, what a load off my mind that was. Then, it started. It continued with

Because you know I I’m,

The first contractor I tried to hire was a guy that was recommended to me from a friend that went to church nearby who had a friend at church and this guy you know he had a little handyman remodeling business and

I would try to figure out how much it was gonna cost me to fix a house and he would say, well, I won’t know him until we get in there and take it all apart.

[15:27] And I thought that was the only things were done and it took me a while to get to the point where I just can’t I can’t operate that way and you don’t have to,

Anybody tells you that is just gonna make up a number.

What to look for.

You’re gonna be required to do some things that you’re that you don’t enjoy.

But all of it is worth it if you can get to the point where you can begin to scale so you start to replace yourself.

[16:17] You will reserve for yourself.

[16:25] Anybody can make deposits at the bank for you.

You can hire a lot of this out.

They’re saying yes to a deal. You can hire people to do your marketing. You can hire people to do your negotiating. I mean, you could hire out every piece of this except for final approval on the deal.

And

The entrepreneurial myths. Don’t think that you’re building a business that you’re gonna be able to sell, okay? Just don’t even think that. Don’t allow yourself to luxury of of considering that because this business is a very.

Personality and person driven and it’s you when you’re out of the picture

Your business really doesn’t have much value. Because it’s a business that any other person with your abilities can replicate

Okay. If you have real estate, you can sell the real estate but your business and systems and so forth. It’s not gonna be a business that you will be able to package up and sell,

Okay.

[17:45] Maybe this should have been one of the first rules but just start thinking about your life in the future.

Your,

Think about 3 years away 5 years away and 10 years away what is the life you dream about you can call it vision you can call it goals whatever I don’t care what you call it terminology didn’t really matter to me but I want you to think about.

[18:10] Where are you going to live.

[18:19] With your day.

[18:28] I want to spend some days in the mountains and some days at the beach.

See those are the kind of things that I want you to think about.

[18:41] The next part of this is to think about your reputation.

Maybe you wanna do this quietly behind the scenes never drawing attention to yourself.

[18:57] If that’s what you wanna do it’s possible to do that in this business but you have to think about how you go about it.

And my case I don’t know I managed to drop attention to myself.

[19:18] Make a budget.

Showing how much it cost to live your dream life. One of my mentors encouraged me to do this. I spent a week in thinking about my dream life. I mean, a world and and.

Things that,

Somewhere in Europe where I ran a castle for a week and have servants and everything and,

And take all the kids and their significant others you know so let’s 10 people and plus and and go over just live in a castle for a week or 2 weeks and that wow whatever I’m making up making this up so let’s make it 2 weeks

And then I’ve you know I would like to have a weeks vacation on a yacht,

Just to see what it would be like to be out on a yacht. On the ocean. And let’s go for a big one.

[20:10] And so I that arrived down all this crazy stuff that I don’t know if I’ll ever do

I went and researched how much it would cost to do all this and then I started thinking about some legacy things.

How much money I wanted to leave the kids but also some things I wanted to do to provide an

Incentive for them to get engaged in entrepreneurial activities even while I’m living and

Put up money for them to be in engaged in businesses that they may want to do and and how to go about that and put money instructions to all of that and

I came up with exactly how much money I needed to earn every year to accomplish everything I thought about the foundation and how much money I wanna give it every year and how what I wanna do with that all of that is included and I have this dream

Budget. This was such a great idea,

And every aspect of my life and you know what.

[21:17] Yeah.

So, this is a really important piece. Make a budget that shows how much it cost you to live your dream life. I want you to have that budget you can back up from that into how much.

What you have to do,

Okay? And then think about how much net return you can reasonably expect from your investments, real estate stocks, precious metals, whatever it is you’re doing to invest passively.

And how much you’re gonna have to invest in order for those investments to afford your lifestyle let’s say

That you had a crazy life plan and it was gonna take you a one 1 million dollars live,

Almost nobody needs a one 1 million dollars a year to live okay.

Let’s say 10% if you’re making 10% return on your investments and that return

Then you need to have 10 1 million dollars socked away somewhere investments if you have 10 1 million dollars put away somewhere and conservative investments that make you 10% return then you’re going to have a one 1 million dollars a year in passive income.

That’s the kind of math I want you to do. How much will you have to invest in order for those investments to afford your lifestyle because you are financially free when your passive income pays for your lifestyle.

[22:39] Alright.

[22:48] Break it down to yearly.

How can you adjust that lifestyle to start living it sooner and then add some of the more shall we say esoteric.

And some of them maybe you never need to do. I don’t know if I ever need to go rent a castle in Europe for 2 weeks.

[23:19] You’ll have an opportunity to make something like a plan.

[23:32] And rule number seven.

[23:38] It’s pretty easy to make more than you really need in this business.

[23:50] Hey.

First thing you do is take 10% of it and set it aside for a charity or church,

Okay, go ahead and move it on out.

And put it away in a bank account somewhere to help you pay your taxes because you know Uncle Sam is gonna come call and and it’s gonna take about half of what you make by the time you pay local state and federal taxes on your income I know.

That seems.

Most people aren’t aware of how much they pay in taxes because they’ve had withholding all their lives and I’ve often said that if you wanna create a real tax revolt in this country just stop the automatic withholding and may people write a check out of their bank,

To pay their taxes then they’ll realize how much they’re actually paying when people say why didn’t pay me taxes I got money back.

[25:05] Are you even paying attention?

It’s like you gave the government,

Interest free,

Anyway, get me off this bandwagon please. Let’s talk about your legacy. I want you to think about generosity. You’re gonna have to pay your taxes but I want you to think about generosity and I want you to choose it as a lifestyle habit.

We can cite all kinds of studies here but people that are intentional about their generosity lead happier lives. They lead more meaningful lives. This is not about

All the money that you can accumulate to buy yourself more stuff is not what it’s about I’m not impressed with that I’m not impressed with the people that make that to be what they’re about,

I I steadfastly refuse to.

Expensive lifestyles as a way of recruiting people into my courses. That’s not, that’s not what we’re about.

[26:30] I want you to plan on leaving your children something,

Now, when you’re thinking about what you’re leaving your children, boy, this is where it gets a little difficult. I like a line from a movie that George Clooney was in one time and I think

It’s the movie maybe called descendants and what that great of a movie really the main thing I remember about it was it was set in Hawaii and this this one line he said I wanna leave my children enough to do something but not enough to do nothing.

[26:57] That’s a very good way of looking at it.

Want to do is we want the spare our children.

Built into us the character that allowed us to get to where we are and if we spare our children all hardship they will not be hard they will be soft.

And that’s not a good thing.

We need to find that balance with our own children. This is not a show while child reading. It’s a show on real estate investing so that’s all I’m gonna say about that right now.

The next thing I wanna encourage you do is find a cause that’s bigger than yourself. Perhaps more than one.

And I believe actually adds to your life wealth it may take away from your bank account but it adds to your life wealth it adds to your life worth.

Just make sure it’s something that’s doing good in the world.

A legacy of generosity with charities.

And a plan to make the world a better place.

[28:26] You could do far worse my friends.

So, those are the seven rules for real estate investing. Let me go over them again before you hear just in a quick summary fashion. Number one, know your numbers. Number two, learn a terminology. Number three, recruit a great team. Number four,

Treat it like a business number five do everything at first and stop as soon as you reasonably can number six picture your life in the future.

Number seven think about your legacy if you want your own ridden copy of these seven rules for real estate investing please go to Flipping America. Net.

Slash seven rules.

[29:09] If you’re getting value out of this please however you listen to the show whatever platform it is be sure to subscribe and like the content and please write us a review they help us so much who’s your Michael Scott quote of the day.

Guess what i have flaws where are they oh i don’t know I sing in the shower sometimes i spend too much time volunteering occasionally I’ll hit somebody with my car so sue me.

[29:34] That’s it everybody keep your eyes open.

You’ve been listening to flipping America real estate investing for everyone. Listen three times a week on stations across the country or on the flipping America app free in the app store,

Be sure to like us on Facebook find and follow us on Twitter and Instagram and keep your eyes open.

[29:54] Music.

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Flipping America 570, Seven Rules

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