Expected Air Date: 8/25/18
Today is the day we talk about decision making.
We get one chance at this life. We owe it to ourselves to get it right. That doesn’t mean we should expect perfection. What it DOES mean is we should take enough time to think about what we are doing and where we are going to improve the quality of our decisions along the way. When it comes to real estate it’s easy to make a $10,000 mistake. But if you make enough of those you are going to wind up in trouble.
Today we are going to help you get it right — Get it right when you purchase a property. Get it right when you create a repair budget. Get it right when you make repairs. Get it right when you rent it out. Get it right when you sell it. You’ll find that if you’re willing to go to war with the details and get some things right, your business is going go better and let’s face it, if your business goes better, life goes better.
In the news coming up we FINALLY have a reason to go to Baltimore. Ok, no offense to Pat Dornan with Ultimate Rehab Estimator, but Baltimore isn’t one of our favorite places to visit, but that’s about to change. I’ll tell you why coming up.
Also today, the world’s largest Sovereign Wealth Fund missed it’s quarterly return target for the second quarter in a row. I’ll tell you about the fund and what a pitiful job they are doing in just a few minutes. Also on the show today, some things you need to know about flood insurance and living in a flood zone. All that and more coming up…
How to contact us
Twitter and Instagram @FlippingAmerica
We now have a profile at houzz.com for what it’s worth.
Call our National Comment Line: 404-369-1018, ext 1. Leave your message or your question.
- TONIGHT the 27th of August, speaking at the West REIA, Cherokee Cattle Company, Marietta, GA 6:30 pm
- The Flipping America Mentoring Program, August 28-31, Sandy Springs, GA
- Menternship Also.
- Ten Deal Sources explored and explained.
- Complete Deal Analysis.
- Finding the re-sale value of any residential property in the U.S.
- How to estimate repairs from your desktop.
- How to finalize a repair estimate through a site visit.
- Structuring your business for effectiveness and asset protection
- How to set up a web site for your business.
- Understanding the various ways to get your deal funded.
- Learn creative deal structures.
- The mini-course in negotiating
- The full course in renovation.
- How to find, vet, and hire contractors.
- How to manage the process
- How to solve the inevitable problems that arise.
- Learn how you could get your deal 100% funded – not just your next one, but every deal you ever do from now on.
- Get all the forms, the documents, the checklists, the procedures
- Get the scripts for your conversations
- Hiring questions for realtors and contractors
- Answering the phone
- Talking to sellers
- Build rapport
- Get key information
- Learn motivation
- The course comes with on-going weekly group coaching calls
- You also get one-on-one guidance through your first four flips.
- This is the three day dive into a year’s worth of training and guidance. But our commitment to you doesn’t end in one year. We are with you at LEAST through your first four flips and definitely until you have more than doubled your training investment.
- What is the investment? What is reasonable? Let’s talk about $50,000.
- The cost is $12,967, but if you use the coupon code “radio” your cost is $9,967.
- Go to www.flippingamericanetwork.com/Mentoring and sign up today. We only take about 10 people per class and several have already signed up. There’s just a few seats left.
- Menternship Also.
- 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.
Topic: Get it Right
Comment Line calls and Questions
Call 404-369-1018, press 1 and leave your message!
Questions@flippingamericaradio.com Tell us where you’re from!
- Evangelina, Baltimore, MD, “I understand the MAO formula. But I can’t find any deals that fit that number. Several of my friends are buying above the price that formula recommends and they seem to be doing ok. Can you explain some of the reasoning behind it?”
- Roderick, Tampa, FL, “I want to buy rental properties. It seems like if the property has $200/month or more in positive cash flow I should be fine. But one of my friends said I should check with you. No offense but I had never heard of you until now. Am I missing something here? $2400 a year is good money and with 10 of those I can quit my job.”
- Stephen, Boulder, CO, “Can you explain the difference between cap rate and cash on cash return? What should I be looking for when buying a single family rental?”
- Sherry, Sebring, FL, “What are the key steps when buying a flip project in another town?”
- Lynetta, Jackson, WY, “We want to bounce back and forth between Jackson and Austin, TX, you know, avoiding the weather extremes but getting in some skiing when we want, etc. We are both in our mid 50’s and our question is should we buy something in both places or just do longer-term rentals? We could pay cash for both places, but can’t help but wonder if our cash is better off elsewhere.”
- Rhonda, Milwaukee, “Estimating a rehab is overwhelming to me. I just don’t know where to start. Please help.”
Motivational Thoughts for the day
- “People often say that motivation doesn’t last. Well, neither does bathing — that’s why we recommend it daily.” — Zig Ziglar
[0:28] Time 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 thank you Kathy Curtis.
We get one chance at this life and we owe it to ourselves to get it right.
[1:00] Now that doesn’t mean we should expect Perfection what it does mean is we should take enough time to think about what we’re doing in.
We’re we’re going to improve the quality of our decisions along the way when it comes to a real estate deal it’s easy to make a $10,000 mistake.
And if you make enough of those you’re going to wind up in trouble today we’re going to help you get it right.
Get it right when you purchase a property get it right when you create a repair budgets get it right when you make repairs can it right when you rent it out.
Get it right when you sell it you find it if you’re willing to go to war with the details and get these things right your business is going to go better.
And let’s face it if your business goes better.
Life goes better everyone wants to talk about life-work balance and I understand that and it’s kind of the big buzzword now but the reality is a third of your,
existence during your working years during most of your adult years a third of that at least is given over to your work and so.
[2:03] It would be great if your work went better wouldn’t it alright today we’re going to help you get it right now
we’re not here to help you get it right when it comes to relationships and family although I did when I was prepping my notes and and
wandering around in my little writing at the beginning of the in my prep for the show I did get off on a little tangent about child rearing and getting that right and so that’s a Blog that may show up at over my website Roger Blankenship. Calm and if you didn’t know I had that website I don’t say much about it but it’s there.
And I occasionally will updated with the blog and if you want to know me the person better.
He probably had to go over there and check that out but in the news coming up we finally have a reason to go to Baltimore.
Okay no offense to pad Dornan if you’re listening to this Pat with the ultimate rehab estimator
the best construction estimating software on the market and really kind of a one-of-a-kind thing that’s from Baltimore but you know Baltimore isn’t one of our favorite places to visit
however that’s about the change.
[3:07] I’ll tell you why coming up also today the world’s largest Sovereign wealth fund missed its quarterly return Target for the second quarter in a row and I feel so sorry for them but I’ll tell you what the fund is and what
pitiful job they’ve been doing and just a few minutes and on the show today some things you need to know about flood insurance in living in a flood zone all that with your questions coming up in just a few minutes I want you to contact.
[3:34] By reaching out to us at questions at flipping America Network
dot-com you could send us any real estate-related question and we will answer it we don’t know the answer to everything but will get you the answer and boy we had some doozies of questions come in this morning
complicated deal structure that I had to sit and look at for several minutes before I could give an answer no we’re not going to do that one on the show because it’s kind of a one-off thing
super high-end in super complicated but we did answer the question
and that’s our commitment we will answer every question that comes into the show if it’s a tricky one or a complicated one sometimes it
it comes all the way to my desk for an answer but that we have other people here that can answer the questions and we’re going to get you the answer even if none of us know it
alright so send your real estate questions to questions if flipping America network.com find us on facebook.com look up flipping America media
on Twitter and Instagram follow us at flipping America we are on YouTube Just Go to YouTube and search flipping America and you’ll find us no doubt.
[4:41] We have our own Channel Please Subscribe and please tell us what you think and we’re on the other social media as well but I’ve given you enough for today.
[4:49] Some of you don’t do social media if you would just like somebody.
Talk to you that’s fine if you’re willing to go to the website you can click the blue button and get a strategy session that is a free 30-minute phone call and there is no cost or obligation to this and during this phone call we are not
trying to sell you anything we are trying to help you understand your best fit in the world of real estate investing now if one of our training or courses or something is a good option for you will certainly recommend it.
[5:18] That’s not the point the point of it is to get you going where you need to be
and your real estate investing career here on Flipping America we do teach people how to make money in real estate but we don’t encourage everyone to drop what you’re doing and start flipping houses like you see on TV instead we encourage
everyone to have real estate as a part of a balanced Investment Portfolio and to that end we want to give you the best information answers to questions
Trends stats demographics whatever it is we can to help make you better no.
[5:54] For some people fixing and flipping is what they want to do you’ve seen it on TV your.
[6:01] You caught the Allure the sexiness of just fixing up a house and selling it for a retail price and you’re pretty sure it’s what you want to do
well the first step is if you’re not sure if your only pretty sure you should just get my foot started series it’s a video you can get off our website for $97 but if you’re ready to take the plunge please please
please do not go to one of the national gurus and give them you know
it’s a free 2-hour followed by the $1,500 weekend or something like that and basically they’re walking you through a marketing final design to get
32 $50,000 out of you and you’re saying well that would never happen to me because I don’t have Thirty 50000 listen to these guys are
experts in showing you how to come up with 32 $50,000 and it’s not going to be them carrying a note they’re going to help you get
no interest credit cards and add an enormous amount of credit card debt to your life or they’re going to have you borrow from your own retirement to do it these things are unconscionable to me and I can’t do it I don’t think you need to pay
32 $50,000 learn how to flip a house anyway there are a lot of moving Parts but it’s just not that complicated okay
you come spend 3 days with me and then agree to get on the coaching calls for you know a month or two or 6 if you need whatever it is you’re going to be all right
so we got a three-day training coming up August 28th thru 31.
[7:28] 28 through 31 and up in this training we’re going to cover Soup To Nuts everything you need now it’s going to be like drinking water from a fire hose that’s a lot of information coming at you but here’s the cool thing
if you pay your money and come to this course you have access to the information from now on you can take the course as often as you like there’s no charge ever to repeat it to repeat any of the courses in
the flipping America course catalog if you want to call it that you can repeat any of the courses as often as you want you only pay for them one time
here’s what comes with the course first of all we’re going to tell you all the ways that we find deals at least 10 they were going to help you make sure that you know what a deal looks like.
[8:09] And we’re going to do a complete deal analysis give you the spreadsheet that we use in our own business how to find the resale value of any residential property in the US
how to estimate repairs from your desktop out of finalize repairs to your site visit structuring your business for Effectiveness and asset protection how to set up a website for your business understand the various ways to get your deal funded learn creative deal structures
the mini course in negotiation in negotiating and the full course in renovation that includes how to find vet
hire contractors how to manage the process how to solve the inevitable problems that arise learn how you can get your deal 100% funded not just your next one but every deal you do from now on and addition to all of this you going to get the forms that documents that checklist the procedures the scripts for hiring how to answer the phone how to talk to sellers
everything you need to get into this business all you got to do is go to flipping America network.com mentoring and sign up today.
[9:09] I don’t know what today’s county is but we only have two or three seats left in the room for the August training and I want you there
sign up for the class make your reservation to get down here it’s just it’s just a week away not even a week away we’re going to start.
So I sign up now and will see you here in Atlanta coming up Thursday Friday and Saturday next week.
[10:06] You never know what’s around the corner but you can be confident that you’ll be ready for whatever comes your way Legal Shield and ID shield look out for you so you can get back to living life
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[11:52] I want to thank all of you for tuning in and listening to us here at flipping America and
I want to also thank you those of you who have downloaded the app from the App Store just to let you know
flipping America is on Coast to Coast AM FM stations but that doesn’t mean we’re in every market and so if you want your friends to listen and they’re not in one of our broadcast areas.
[12:13] Please have them download the app and you go ahead and download the app to it’s completely free there’s no in-app purchase there’s no upsell we’re not trying to get money out of you and anyway we do ask that you know Peyton Stewart sponsors in and
you know take advantage of their products and services but just download the app and and connect it to the Bluetooth in your car and.
Listen and if you want to be involved in real estate investing in your not listening to the show I think you doing yourself a disservice so here’s an opportunity to listen to it.
If you’re in Atlanta on a Wednesday please plan to stop by and have lunch with me the flipping America guy and group of people that come out and meet together
we call it creative dealmakers but basically we just sit and talk real estate for a little while we enjoy Mexican food at the Huey luey’s restaurant on
the corner of Abernathy and Roswell Road in Sandy Springs Georgia and that’s means it’s time for the news and that’s.
Right into the world’s largest Sovereign wealth fund.
And let’s go ahead and get this embarrassment of the way the government pension fund form from Norway is the largest Fund in the world and.
[13:28] The government sets a target for this fund of 2% return per quarter
2% and the course that works out to an 8% annual return now 8% is a pretty nice return.
That’s okay this one trillion dollar Sovereign wealth fund.
Has missed its Target returns again this past quarter they only made 1.8% on the money.
All together now everybody the trillion-dollar fund only made 1.8% in 2nd quarter too bad so sad.
[14:09] . I’m sure it must be harder to make a return on your money when you when there’s that much money to invest but my goodness I was.
I wouldn’t look at a property with the partner earlier today and
the price is a little higher than we want to pay and we were talking about what we could offer for the property and we ended up settling on a price that was well below the asking price but still
yielded a a net of about.
30% annualized return on our cash okay and just anything less than that we just really didn’t want to do it.
And we were laughing about that how silly it seems to want that kind of a return but that’s the kind of return that you can get in this business and you should because unlike
the building business the remodeling business is full of unknowns and if you don’t have a margin in there I’m going to answer this question will bit later so I’m not going to get off on it but.
[15:10] In fact I’ll just leave it there and go back to the picking on the Norway Sovereign wealth fund at 30%.
Where marginal at 20% we don’t want to do it and here they are they can’t even make 8% so what I would say if anybody from Norway is listening
why don’t you tell your wealth fund to invest with the flipping America guy we have a fund,
and they can they can put their money with our fund and if you’re in a credit investor by the way you we welcome to you to have a conversation with us about investing in our fund but you got to be any credit investor to do that so make sure you are before you set that up
good strategy call on in the email notes let us know you’re an accredited investor and you want to take a look at our fun that’s fine no problem but
this fun from Norway could fund our entire
Target for our next fundraiser is our goal and you know our little part to play is such a small piece of there 1 trillion dollars I don’t know that are Stellar returns with
impacting that much but it might and at least for our part we send them a much better return than 1.8% per quarter all right.
[16:22] I am delighted to bring you this next story and this is from CNBC.
[16:28] Because a little over a year ago I predicted that by
summer of 2018 the markets would be slowing down and heading toward a more normalized rate and normalize market and what that means is typically a three month supply of homes on the market and that means
sellers are experimenting a little bit more with prices you can’t just put a house out there and get whatever you’re asking or over asking and so you may even have to have a little bit of a price reduction.
[17:02] About a month ago.
I ate Crow on the show because there was no signs of slowing down and I said mount maybe it’s not going to happen the way I saw it and I talked about the reasons why and included in that are
some of the things we’ve mentioned a number of times.
The new home construction is a little bit slow to get going back there a lot of younger people that would typically be in that industry don’t want to work in that industry lot of the builders that got out in 2006 and 7 have to come back and are never coming back
plus the cost of raw materials has gone up substantially in just the last 12 months now all of that has
it is continuing to the ongoing shortage of inventory but even with the shortage of inventory home prices can only go up so much with Millennials now entering the market in wanting to buy
there’s just a limit to what the prices can be and so we are now seeing we just got the report from Zillow and it’s reported on CNBC that.
In the last quarter 15% of all listings had a reduction.
[18:07] So there you go that’s a sign that the market is slowing down we’re not in free-for-all free-fall we’re not in a crash nothing like that don’t panic anybody it’s just we’re getting back to a normal market so you can’t list them on Friday and expect to have six above offer,
I mean above asking price offers by Saturday morning that’s that time is may be coming to an end and they said is that is for those of us trying to sell houses that’s all right because it’s going to make houses easier for us to buy.
[18:36] Whenever there’s good news there’s also challenges in the investing World dickly in real estate so don’t worry about it folks just keep on buying them right.
And remember the theme of the shows are going to be getting.
[19:01] 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 flip starter event.com but in the meantime Give a listen to Pat caywood.
[19:27] 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’ve spent today with Roger Blankenship.
Learning about his program and boy do I wish I’d met Rodger.
[19:49] He has a clear concise program and many tools that are going to be very hot.
[19:55] And starting and managing the program and the mentorship and Leadership and coaching that he saw frame are invaluable.
Thank you so.
[21:00] Dangers of only been to Baltimore a few times and as long as you know Camden Yards has been around for a while it was the darling of Major League Baseball for a while but now it’s one of the older stadiums.
Out there I’m just not that much of a baseball fan I was going to make a special trip to Baltimore
just to see Camden Yards all due respect all the baseball fans out there but I understand Baltimore is not even that good this year and their trade away a lot of their good players to stock up for the future hey I feel that pain cuz that’s what Atlanta is done for several years and it looks like it’s paying off this year anyway this is not a sport show this is a show about real estate but I’m going to get off the real estate subject slightly this it does involve real estate okay it’s tangential to real estate because
let you know part of real estate is tourism right in tourism is going to start happening in Baltimore in just a year or so.
[21:46] Because are you ready for this ladies and gentlemen Ireland is coming to Maryland that’s right Guinness is going to open their first u.s. Brewery
in 60 years us fans of Guinness won’t have to travel to Dublin to indulge in tour and tasting experience of one of the most recognizable brands in the beer industry makers of the beer toast at the opening of the 90 million dollar Guinness open gate Brewery & Barrel House August 3rd near Baltimore,
its first year
Brewery in more than 60 years it’s going to be located in relay Maryland 10 miles from downtown Baltimore the attraction is expected to host 300,000 visitors a year,
do it’s gift shop Brewhouse Taproom in restaurant which opens later this month Guinness open gate sits on a 62 acre property where parent company
Diageo the world’s largest drinks maker had owned the property since 2001 after 9 months of construction involving 2250 workers it was exciting to see the project come to life says Tom day chairman of Diageo Beer Company USA
it took an army of people to build he said it’s one of the proudest moments of my life
now the tap room is going to have 16 beers most of which are brewed at the site.
[23:02] Including Guinness IPA and Crosslands pale ale made with Marilyn grown malted barley and hops visitors can tour the side on their own for now bruising exhibits that highlight the beer making process.
Guinness history and guided tours tours become available by Labor Day so that’s right folks we’ve got a reason to go to Baltimore and the pat here’s looking at you kid
I’ll be seeing you over there maybe we’ll meet at the I’ll be one of the 300,000 in the next year or so looking forward to that so happy news from Baltimore.
[23:37] Switching gears a little bit I told you I would tell you some things you need to know about flood insurance.
This is a topic that comes up from time to time so I’m going to link you to a story from CNBC about flood insurance a lot of America is in a flood zone and you might be required to get flood insurance in order to get a loan on your house.
That’s okay it’s your you’re not alone and that doesn’t necessarily mean that.
The ground is going to flood but anywhere it ever rains and that includes some desert areas.
[24:10] There’s a danger of a flood and so the real difference here is if you’re in a recognized flood zone.
[24:19] You’re going to have to pay a little bit more for your insurance in some cases a lot more for your insurance if you’re not in a flood zone you’ll pay less for your insurance that’s really what all this means.
But if you want to understand the flood risk you need to ask about this before you buy if you’re looking at any kind of waterfront property it’s almost for sure in a flood zone
the house that I lived in raise my son in down on the southside of Atlanta
we had a 2-acre pond in the backyard I guess you could call that a water feature but the house was about 25 feet above the level of the pond and so.
We were not in a flood zone right there the house is actually kind of cut it’s not really much of a hill but a gentle slope.
The from the road 500 feet away all the way down to the pond and so no worries about flooding at that house and the only time that house ever flooded was we had a couple of problems with
burst pipe over the years but that’s a different story that’s a different kind of flood all right if you want to.
Find out more about your flood risk you can go to an insurance agent and ask them to pull a clue report on the property under consideration and that report will give you the history of all claims that have ever come against that property and so you’ll know if there’s ever been a flood and if
people have a.
[25:42] Add claims about a flood before this is very important if you’re buying a house next to a river or a creek that looks a little suspicious.
This article explains some of the abbreviations you’ll see on your flood zone designation I’m not going to go into all of that here you can check that out for yourself but you need to investigate
when you’re looking at the property you need to investigate what is going to take to make your home flood proof.
And that includes maybe some retrofitting and maybe some repairs to watch there so just make sure you’re aware of that particularly if there’s water nearby or if you’re on extremely flat ground with a source of water anywhere close
you need to make sure that you consider the the risk of flooding and make sure you’re covered.
[26:30] One of my sources for news is realtor.com and I’m linking you to the front page of the realtor.com just to poke fun at him it’ll probably change by the time you see the link but I’d probably know how to take a snapshot of this because
at the top in the hero portion of the website web page there’s a right front center there’s a big headline says mortgage rates tumble as housing starts to drag down the economy that’s from MarketWatch and then.
The very next session right
below it there’s a section called the latest and it said mortgage rates climb as housing market loses its Mojo So what I really want to ask realty.com realtor.com is.
Are mortgage rates going down or going up.
Because the contradiction is one line away from each other on their lead page on their website and yeah I am going to take a screenshot of it so I can have it for future reference I just
really thought it was funny I think that mortgage rates are actually trending up a little bit.
[27:34] All right that music means we’ve got to go to a break and will be back and I’m going to deal with your questions and we’re going to help you get it right.
[27:52] Are you one of the 70% of Americans living paycheck to paycheck and tired of the stress if so I understand that used to be in that 70.
I start investing 2003 with my net worth with -80 thousand since then I’ve built a business that generates over $500,000 a month in income and allows me the freedom to do what I want I’m Brad Chandler and I tease people just like.
How to find Freedom through real estate investing using a tactic that doesn’t require credit or tons of cash for a free training on how you too can do this please visit Brad channel.com for freedom.
Hey flipping America listeners have you ever walked into a property and said I have no idea what it will cost to repair this home those days.
[28:40] Was it your pocket designs by Real Estate Investors for Real Estate Investors ultimate rehab estimator just needs to know their properties measurements and what you want to do it produces a statement of work a bill of materials and increase a deal NYC.
[28:58] Sales taxes by your state using the properties of code alternate rehab estimator is for all Real Estate Investors new and experienced
just visit ultimate rehab estimator. Calm and click on plans and pricing we have for plans all designed to meet the needs of your real estate business ultimate rehab estimator works on every device you have and wherever your property is skip
contractor in your pocket today at ultimate rehab.
[30:02] I am Roger Blankenship and I teach people how to make money in real estate thanks for joining us here today on The Flipping America show.
I’m going to devote the rest of the hour to answer your questions remember if you have questions you can send them two questions at flipping America network.com that’s questions at flipping America network.com.
We promise you that we’re going to answer your question even if we don’t know the answer will go get the answer and send it to you.
Now of course A lot of the things that people ask you could probably find by digging around on the internet.
But people’s a lot of times just want my particular slant on it and my slant is not always the standard wisdom.
But sometimes the standard wisdom is standard for a reason and we should understand it so.
And that’s what we’re going to do right now Evangelina Baltimore Maryland says.
Was interesting Baltimore Maryland Hayward maybe we can get together and Evangeline when I come up there to visit again this place
anyway she says I understand that the Mayo formula Mao formula,
but I can’t find any deals that fit that number several of my friends are buying above the price that formula recommends and they seem to be doing okay can you explain some of the reasoning behind it yes I can next question Rodger no okay.
[31:20] Yes I can and I will I love it I guess I’m just a little bit of a smart alec.
If people ask me a question that ends with a yet that can be answered with a yes or no I do I just usually say that yes or no and then.
They really want the explanation but.
That’s just me being weird have a little bit of fun and yes okay my kids all think my sense of humor is weird so I guess you know if 5 of them agree it must be true.
[31:51] All right the maximum allowable offer formula
The Mao formula this is basically saying that you need to be all in in a property at no more than a certain number in the standard mail formula in the industry is.
[32:10] It’s after repair value.
That is what you’re going to sell it for when it’s all fixed up and the abbreviation there is a RV * .7.
[32:22] So you want to be all in at 70% of arv Minus cost of repairs.
[32:30] Okay and yours a quick example if if the arv let’s just do this for the sake of simple man that the arv is $100,000
then you want to be all in it 70
$70,000 and if the repairs are 15,000 and wouldn’t you love to find a house where you could fix it for 15000 that used to be the norm for us back.
We used to have less than 10 but those days are apparently long gone anyway if its 15000 you subtract 15000 from the 70 and you end up with 55,000 okay so that means.
When you complete this project you will make you will have a 30%.
Gross margin on your product that’s good and some people say that’s greedy but I say that’s not your neck.
[33:23] The net is actually going to be something less than that because that never date doesn’t take into consideration
you’re holding cost if you borrow the money you’re going to have a cost associated with that if you pay commission to a sales person you’re going to have some costs associated with that and in fact historically.
We’re going to spend another 8.
[33:46] Are 10% of that a RV just in our holding cost and we’re going to end up netting around 18 to 20% net.
[33:57] Return to us.
And some would say well that’s really good and others would say that still kind of greedy come on man that’s being really greedy when you think that you can do the average deal in 6 months and so you going to be making 36% return your vestment come on man well here’s the other thing
and I I kind of alluded to this earlier I got a little ahead of myself rehabbing is not the same as new construction new construction you don’t have that many surprises.
Rehabbing is almost nothing but sir but surprises,
you got an older house here you want to replace a shower valve and you open up the wall so you can replace that shower valve only to discover that that shower valve has been leaking probably for the last 20 years
your pipe is corroded and the inside of that wall has something black.
Growing on the surface that scares you to death because the n-word is just not allowed around here but the next thing you know you got a call a mold remediation company to come and inspect this black stuff on the wall to make sure that you do the right thing for your future buyers and you
properly mediately look you can’t do it with a brush and Clorox certain types of mold can’t be dealt with that way,
there are chemical formulations that only the mold remediation companies have and you owe it to your own Integrity to your own conscience to take care of that in the right way well that’s not
[35:24] And that’s why you keep that extra margin in there now we put a contingency in all of our rehab budgets but also we build room into this and it sounds like greed to the uninitiated but enough things can go wrong.
Even experienced people can miss things from time to time but.
There are some things that are completely hidden from View and you wouldn’t you couldn’t possibly know about it until after you’re digging into the project
and so Evangelina this is why we stay true to the formula the people who are buying these properties within our margins they’re doing okay because everything’s going.
According to plan but they are constructing their business around perfection.
[36:13] And you can only get away with that so long the first time something comes in that isn’t perfect.
You’re going to lose money they’re going to lose money on a deal and losing money on a deal is a painfully educational experience is a painfully educational some of the best lessons I’ve learned
At the point of a great deal of pain I would like to spare everyone that paying them but not so much that I want you to.
Miss out on some of these life lessons so.
Go ahead and buy them on a thinner margin at your peril but remember the theme for today in the questions that we’ve selected to take on the show today are ways to help you get it right.
And what I would suggest that you do avengelyne if you can’t find deals in your area don’t lower your number.
[37:07] Change area I’m not saying move.
I’m just saying movie or investing activity get further out in the suburbs until you can find the margins that you need to give that safety measures so you have room for things to go wrong you’ll be glad you did.
[37:27] Alright we’re up against the next break and I don’t have time to give the this question a full answer so let’s go ahead and take that break and will be back in just a minute.
[37:50] 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.
[38:04] Peter Falkner here I tended a one-day flip starter training session led by Rodger blank.
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 so it 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.
[39:02] Rodrick from Tampa Florida says I want to buy rental properties it seems.
Like the property if if the property has $200 a month or more in positive cash flow I should be fine but one of my friends said I should check with you.
No offense but I had never heard of you until now am I missing something here $2,400 a year is good money and with 10 of those I can quit my job all right Roderick
there’s nothing wrong with your math 2400 a year is good money and who.
Couldn’t squeak by on $24,000 a month the problem is if it’s
you didn’t really Define the cash flow but I’m I’m going to just assume since your friend told you to talk to me that your $200 cash flow is gross cash flows okay such as the the house payment is.
Your rent payment is 900 what I’m going to suggest you Rodrick is when all is said and done.
[40:05] You will typically lose money on that house.
And I know this is going to come as a surprise to you and I know it’s not what the seminar Guru said he probably wanted to sell you some of their rental properties that they have because they don’t want them because they know that they can’t make money.
That’s a rant for a different day it seems like $2,400 you should be fine but this is think about this in Practical terms and then we’ll do some math in Practical terms.
$200 a month $2,400 a year sounds pretty good when that tenant moves out what are you going to do.
You’re going to have to paint some walls.
[40:46] You may have to replace some carpet you may have some repairs and maintenance and other things along the way the fact is.
It’s tough to maintain a house for $1,000 a year and when you have a move out it’s really tough to.
Do what you need to do to make it rent ready on $2,000 it’s really a challenge unless those people left it immaculately clean which I don’t know in my experience never happens.
And I’m I’m thinking that.
With this kind of margin $200 a month you’re probably in a mid to low end property.
Nothing wrong with that but you know when you’re in mid to low in property to tend to have a few mid-to-low in tenants and they tend not to be as careful with your stuff as they would be with their stuff so you may have,
you almost certainly going to have to pay the property and let’s say it’s a thousand square foot house.
If it’s a thousand square foot house is going to cost $1,500 to paint it so there goes $1,500 of your 2400 you left with 900 and then.
Roger what’s it going to cost you to insure the house.
[42:00] Is it going to cost you more than $900 is probably going to cost you more than $1,000 and what are your property taxes on that house
when you’re talking about $200 cash flow are you talking about cash flow after taxes and insurance been paid if you are then that’s a little bit different but there are some formulas that you need to pay attention to folks when when you’re.
Buying rental property and one of the things that you need to understand is the loan constant.
Now I can’t really teach you the loan constant on a radio show
there’s math involved and it’s hard to conceptualize math while you’re driving down the road listening to the show but if you’ll just make yourself a note or if you’re driving a mental note
to look up loan constant and understand the loan constant that is a first piece of what you need to know about
buying a rental property the next thing you need to know is capitalization rate and that’s actually the next question so we’ll get to that and.
And then and then if you if you’re talking about capitalization rate or cash on cash return you need to subtract your rate of return.
[43:09] Subtract your loan constant from your rate of return and if that ends up to be a positive number then you’re probably going to be okay on cash flow because that
rate of return is going to take into consideration these expenses that were talking about now if all of this sounds complicated it’s not really as complicated as it may sound at first because you’re talking about.
Something known as a yield spread and that yield spread is the difference between your rate of return and.
[43:39] Your expenses it’s simple.
That’s that’s it right there and if that number is positive then you going to make a little bit of money and if you have a perfect situation you may make more money but more times than not.
Tenants are not perfect and the rental situation is not perfect but we’re talking about here my friends is a way to get it right.
[44:01] Okay I want you to get it right because I bought rental houses based on the quick information from a seminar on the weekend.
And thought the same thing Roderick I thought the same thing man I am about to make it I’m about to be wealthy
because I’ve got these houses that are cash flow and 150 to $200 a month okay when I was only $100 month and I thought okay I’m just going to make so much money.
And after a couple years this I was losing money hand-over-fist.
I was losing money because these houses I bought from the guru and they were in terrible areas and tenants moved in and out and I had trouble collecting rent and I had to evict people I would always have to paint and
it was a nightmare so please please please listen to this understand.
That you need to know your your real numbers you need to know the return number and you need to know the loan constant and then take it from there alright
Steven from Boulder Colorado says can you explain the difference between cap rate and cash on cash return what should I be looking for when buying a single-family rental alright yes
what we’re talking about here is a rate of return on your investment now if you use all cash to buy the house the cap rate and the cash-on-cash return are the same thing.
[45:26] Okay if you.
Borrow money then you’re going to be looking at a capitalization rate that’s the rate of return on your capital and the formula for calculating the capital the rate of return is basically.
You take all of your income.
Minus your expenses and this yield your net operating income and then you divide the net operating income by your.
Total acquisition price
now when it comes to buying cash flowing rental properties I include in my acquisition price the initial fix up so if I bought the house for 90 and it cost me $10,000 do the initial fix up and just put it into it ready condition
then I make 100 my basis in the property that’s my acquisition okay.
[46:19] So if I end up with if I rent that house out for $1,000 a month okay then.
I can tell you I’m going to end up with an an 8.4% cash on cash return and that’s also the capitalization rate if you’re borrowing the money and then what you okay let me tell you why because.
We running up with $12,000 worth of income right but by the time you factor out taxes and insurance and expenses and use industry-standard so about I go with 30% just go with 30% because that’s safe that seems high but that’s
that’s a safe number you’re going to end up with $8,400 on your investment that’s 8.4 all right.
There’s nothing wrong with 8.4 as a cap rate.
As long as your loan constant is something less than that and the loan constant is kind of a different animal and what you want on this is you really want 6%
interest only if you have a 6% interest only your loan constant is 6% to calculate the loan constant you take the total cost of your loan in in
the given year / the loan amount.
[47:30] So if you have something like a 6% loan at at the 20 years but we don’t have time to do this but you’re going to be looking at a long constant of about 8.5 and,
what this means is the property the property really does not properly cash flow I know this is a little bit more involved than what the gurus normally teach but this is the kind of instruction that you need in order to get it right
when you buy rental properties okay more of your questions coming up right after this quick break.
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[49:59] Cherry from Sebring Florida says what are the key steps when buying a flip project in another town that’s a very good question we get asked that quite a bit because people are just not finding enough deals in their own area and sometimes people live in small towns and want to get into a larger area understand great
no worries the key
player in this whole thing for you is going to be the realtor in that town you’re going to need them to help you with values and a good Realtors also going to no good contractors.
Of course that’s your second
person that you’re going to need in that area your contractor there in Sebring Florida is probably not going to travel over to Daytona or wherever it is you’re going but.
[50:38] Your realtor
wherever it is you’re going will know some contractors that you can meet and interview and just follow our steps to a vet and interview that contractor and make sure you’re getting a good one and always just try one deal with them and see how it works in
maybe make it a small one if possible and then you can go forward from there so that’s the key step Sherry
find a great realtor and then a good contractor are get great on both that’s fine lunetta from Jackson Wyoming we want to bounce back and forth between Jackson and Austin Texas you’re no avoiding the weather extremes
but getting in some skiing when we want etcetera we’re both in their mid-fifties in our question is should we buy something in both places or just do.
[51:22] Longer term rentals we can pay cash for both places but can’t help but wonder if I cash is better off elsewhere this is a great question and it’s a little unusual from the types of questions that we normally get that’s why I wanted to deal with it and
actually the answer is as to be prefaced
with this disclaimer we do not give Financial advice on this show nor do we give legal or tax advice on this show and said this is a show that’s filled with information education and examples and sometimes we make a suggestion
but as always Lynette and everyone else talk with your local legal and financial professionals before proceeding.
Act on anything that I say just because I suggested it because
we’re just doing the radio show here folks all right so here is some things for you to think about now. I would also say at first blush my answer to your question is well it depends.
That’s what my friend Rodger Herring says so a lot of questions about tax issues it depends tell me more alright.
[52:28] It it depends a lot on your situations in and where you are now if you have cash.
To pay for both places and I know the price points in Jackson in Austin and so you’ve got some money
and if you got some money maybe you have enough cash laying around that you can’t deploy it all into Investments maybe you just want a safety measure really we would have to talk to you about where you are and what you want to accomplish with your life and at em right now
but if let’s just put up couple scenarios here.
If it was going to take all of your cash to buy these places I would suggest that you not do that because.
You’re not your cash isn’t going to be working for you at all if this cash is a tiny fraction of the cash that you have and you have plenty of cash to continue doing the work too if you have enough cash invested in other.
Things if you have enough Investments where the returns are covering your lifestyle you are financially free and you still have enough cash to pay for both places then maybe I would think about that but.
If you can qualify for the loans why not do that because.
If you can get the loans around 5% and you could put your cash into something else all you have to do is put your cash into something that makes more than 5% and you’re going to be all right
here’s a hint think about DT investment funds.
[53:55] There’s a hint for you because I would imagine that you are accredited investors so check that out on the web GT investment funds.com all right so.
Those are my kind of covering thoughts for you and I really hope that helps I can’t give you a lot of information because I don’t know enough about your situation but even if I did like I said I’m not really in the advice-giving business.
[54:19] Except to my kids and only when they ask why.
[54:23] I’m going to wrap up today show with question from Rhonda in Milwaukee Wisconsin she says estimating rehab is overwhelming to me I just don’t know where to start please help okay Rhonda I will help.
[54:36] I am going to say this this is where a lot of people getting them hard with the business and think that there’s Easy Money waiting for him out there and all I have to do is you know find a deal here get a loan there find a contractor there boom it’s done
no you’re going to have to educate yourself Oaks Rhonda this is for you and this is for everyone you’re going to have to educate yourself a little bit about the,
Pete’s pieces and parts of a house if you’re going to be flipping houses you need to know the difference between.
Ascension of pain on the window you know for example,
you need to know all of the different parts of a roof and how a roof is basically supposed to work you’re going to need this so you can.
Talk intelligently to your contractor there are contractors out there that once they realize that you don’t know what you’re talking about
they may be willing to pull one over on you and and get a little bit more money out of you than they probably should you have to demonstrate a confidence to them.
So you owe it to yourself to know what some things cost all right here’s the here’s what we do in our business we do a lot of desktop evaluations and over the years I developed a formula that allows us to do a good desktop evaluation the reasoning is
when we rehab a house typically we have about 25% of it that would cover.
[56:02] Paint floors new appliances countertops maybe some new cabinet doors and maybe a roof.
[56:09] That’s about 25% of the house but most of the structure is standing we’re not moving any walls at that point and so if you can build a house for $100 a square foot you’re looking at about $25 a square foot for that.
[56:20] But in houses every 10 years something big goes out and you’re going to need to replace it so our basic formula is $25 a square foot plus $5,000 for every 10 years of age in the house plus.
$100 a square foot for additional space if you’ve got to add some space in order to do a bathroom now I know that the actual cost of construction is in $100 but your I’m giving you a safety margin here so if you’re going to add 300 square feet so you can get a nice master bedroom and and maybe a bathroom
there with that just plan on spending an additional $30,000 because it’s going to cost you more than you think if you try to think it out and just you know measure the area and count the number of boards that you’re going to use you don’t need to get that Nitty Gritty with it
now I know that if when you’re ready to take the next step and see what we do is we’ve got this formula that we apply and that tells us
pretty reliably what we’re going to spend and so will make our offers accordingly then if we get one under contract we’re going to go and actually walk the property with the tape measure and flashlight clipboard camera and we’re going to make a record of everything that’s out there and we’re going to make real plans and we’re going to price it out we’ve got a spreadsheet that helps this price it out
but also my good friend Pat Dorman’s ultimate rehab estimator is out there and available and if you’re new at this.
[57:44] Rhonda you should use it downloaded and use it I talk to people who use it they love it now
just because I don’t use it doesn’t mean it’s not a good product I’m you know 800 projects into this thing and I already know what things
cost okay so but this is a project that you probably should give a try and then then the last step to this is to get your contractor to look over your shoulder and tell you what,
he’s actually going to charge you and that’s your most accurate that you can’t get the contractor out there when you thinking about the house so use the formula.
To least make the offer and then during your due diligence time get a tighter offer you some estimating software.
Research things on the internet do your homework.
Learn these pizza and parts pieces and parts and what they cost and then get your contractor involved after you’re really proceeding to or Too Close.
All right get it right folks.
[58:54] I thought for this week is come from Zig Ziglar.
He said people often say that motivation doesn’t last well neither does bathing and that’s why we recommended daily.
[59:08] And it’s brought to you by the foundation for Renewal working together with communities across this great country of ours to impact and improve lives find them on the web at renewal fund. Net your gift is tax deductible and is always much appreciated.
[59:32] This has been flipping America real estate investing for everyone.
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