We're back today with ten more tips. This is part two in our four part series and
today's ten tips are going to focus on how you rock out real estate by making
sure that you're sinking your teeth into the right kind of deals.
Alright, we are back and we're going to hit you up on the next 10 tips for how
to successfully invest in real estate starting off with number 11 is.. - 11 is the
median now we're talking about the median home value, you've got a
sampling of homes, you've got high priced homes and low priced homes. The median
is the one that falls right in the middle and so we don't want to go above
the median home price in any area that we're investing. Now many of you know
we don't just invest here locally, we invest in the best markets around the
nation and no matter where we go we, want to make sure that we are investing below
the median that is super important. - And this works for anywhere you are in the
world. The median is a really important figure and that really ties in to tip
number 12 which is single-family homes. So what homes at the median price?
Single-family homes which means, Steven, do we do condos? - No. - Do we do townhouses?
- No. - Do we do multifamily? - Not really. - Are we doing commercial? - No. - Now you can do those
strategies but we're here giving you tips for how to be the most successful
brand new real estate investor so we want to invite you to play in
single-family homes that are purchased below the median. National median is
usually hovering around 200,000 to 250,000. There are
homes, for example, you might be a New York City-er like, "Well, Kris you know
the median is a million bucks." Or you might be in San Diego where it is but
you could also be in other places where the median is like a hundred thousand.
For your area, we want you to be underneath the median. If you want to
know what I do is, there's this really cool device people really haven't even
have as much about it. It's called Google and you could say
"What's the median home price in.." and then put your city or your county and then
you're gonna know, "Oh Steven and Kris want me to buy single-family homes
underneath that price range because that's where you're going to find the
majority of people that can buy your real estate and that is a huge help.
- Number 13. This is market familiarity. You want to get to know your
market place. Now there's a lot of ways that you can get to know your market.
Again, Google is an amazing place where you can go just to find out all about
your your general vicinity, drive around, find a little bit about where you are,
what's available where, get price per square foot so if you want to really
know what your markets going for or what's familiar in your area then
identify with the price per square foot. So for example, you've got a hundred
thousand home, it's got a thousand square feet,
you divide the thousand into with $100,000 and you've got a hundred dollars per
square foot. - Now this is important because if you're focusing on median
homes that are single family that are beneath the median and you get used to
price per square foot, here's what you're going to find, you're going to start doing your
calculations on let's call it 2000 square-foot homes and be like well this
one's not a 100 foot, this one's at 85 a foot, this one's at 90 a foot,
this one's at 60 a foot, one of these kids is not like the other ones remember
that from Sesame Street? - One of these kids is not like the other ones.
- Alright so what we're going to do is that's the home that you want to zone in
on because it means that there's a really good smoking deal there, you just
got to finish flushing it out. - Absolutely. Okay, number 14. Fourteen is a CMA. Now what
is the CMA? This is fancy language, we're getting the jargon here. - Comparable
market analysis - Absolutely. - Price per square foot means we think we have a
good deal but then you got to get with the realtor and say, alright let's
actually take this home that I'm looking at and compare it to the other homes
have been sold in the area not just listed but actual solds and you can take
in the last six months that two, three, five homes in the area that are as
similar as possible and then put them into a report and your realtor can pump
out a seamount that may, that would basically say, wow you know looks like
you're able to buy this home for a $150,000 but
it looks like compared to the other homes that have sold in the last
6 months that are most like it, it's worth a hundred and seventy thousand.
Well, there's a $20,000 equity position that is possibly there so see may gives you a
much better indication of what kind of equity might be in this home because if
I'm going to buy a home, buy it in the most advantageous way possible. - Yeah. Okay,
the next one number 15 is home visit. Now there's a lot of people that think they
kind of get a thrill out of this idea. I can buy a home sight unseen alright. I
can just, I could just take this one down, that's going to be fantastic but
the reality is you really should have feet on the ground looking at these
homes. Now it's interesting the first time Kris and I went out of our local
market and started doing out of state properties, we put this amazing power
team in place, we had literally feet on the ground who are going and looking at
all these different homes and if you understand the way
auctions work, I don't know if anyone, if you've ever had an auction of bidden on the auction
steps, you put these bids on right? It's a list comes out, you put the bid on
the home and then you're like praying and hoping, okay, hopefully that bid was
good and hopefully this home is really there and hopefully the wall on this
home is, you know, this doubt door, our walls are still intact. I can tell
you, that's another story for another day, but anyway, the point is, is you want to
make sure that you are seeing these properties and making sure that when
you're putting those bids in or when you're when you're putting it on a
contract that it's good enough because if it's not, that can mean the
difference of you making a lot of money in this home or losing a lot of money on this home.
- So Thursday, Friday, Saturday, around the country, you're mostly having
you know, the sheriff's auctions and homes are being auctioned off and every
week our team goes in and evaluates thousands of these homes and I'll tell
you that often, we have to bring cash to the table on the spot so that we can pay
immediately and we wouldn't dare bid on anything that we actually hadn't
actually first gotten to the house, gotten in it. So visit the home, check it
out, you need to have a chance to start looking at, are there any major problems
that like maybe the house is infested with mold,
maybe there's a meth problem, you might not be able to notice that by visiting
it but after it's under contract, you've got an inspection period, you've got to
have boots on the ground whether it's yours or somebody else's. - Yeah, now let's
take this to number 16 which is, alright, so what kind of home should I be
buying Steven? Should I be doing things that need cosmetic repairs or structural
repairs? - I'm going to say structural repairs. - Really? You want to put thirty, forty,
eighty thousand dollars into a home? You want to jack up a home off of the ground
and be like, yeah "There's no risk in any of that, there's no way this can go wrong."
- Yeah, structural repairs. - Steven, you know the
answer is cosmetic repairs. - I want to buy home, let's... - Let's duke it out.
- Let's do it. - Okay. - Okay, no cheating. - Ready?
Structural! - It's actually cosmetic!
Don't do..
You're right. Okay, alright. I won that one but I will concede. It is cosmetic,
you don't want to get into strum. - I'm sorry you didn't go to the gym today. - I did.
- No you didn't. I worked out my chest today. I'm going to cry like a little school girl.
Cosmetic.
Only do cosmetic work, right, like what does cosmetics mean? - Cosmetic is a small case.
Cosmetic, you know, we're talking about the homes, you know, the small things, the
paint. Maybe you've got some scuffed up walls, maybe some carpet
needs to be done right just the small little things, these aren't huge major
projects, we're not talking on getting into the thousands and thousands of
dollars, you know, several hundred, maybe up to a thousand or fifteen, maybe even
two thousand but once you start getting into major repairs, well if there are
structural issues, if the roof needs to be replaced, I mean some of those things
aren't cosmetic and they just start to eat away at your profits. - And the moment
you find a property that has twenty thirty fifty thousand dollars worth of
work, you can find another deal that is probably a better deal that doesn't need
any of that. Alright, do cosmetic work.
Ignore structural if you go in and it's like, oh my gosh this is a major overhaul.
This house, it's amazing how thirty thousand dollars have a repair job can turn into
forty or fifty thousand and all of a sudden on a flip or on a long-term hold,
you suck all sorts of money in on a short-term or a long-term play and it
just puts you in a bad position so focus on cosmetic, not the structural stuff,
that's a whole new level of expertise. - And where you're going, this actually
gets us into our next step. Step number 17 or success tip number 17
and this is paying attention to the ARV. Now the ARV is the after
repair value. I think of the hard works, aardvark but really it has nothing to do that.
But I have to repair value. - I saw an advert for the first time in my life
at the sandy because it's really exciting. It was a wild looking thing, it
was like had porcupine hair, it had this really long snout and I'm like
aardvark. - Have you ever seen the show biz aardvark? - No I haven't but let's tangelo.
- My kids have, it's pretty amazing. Okay, ARV, let's get into it again. Are you
going to do something again? - Aardvark.
So ARV, the after repair value. This is what Kris was just
talking about actually which is what is the home worth after you've put in these
repairs because if you put $20,000 into a home but it's only going to increase the
value by $15,000, your after repair value doesn't support those types of
repairs. - And this isn't just for the purchase this is for selling, right.
I mean how much work you put into a house when it's time to bring it to market?
I can't tell you whether you should fix it up all the way or whether you should fix
it up bare minimum because the market is going to tell you that. If it depending
on whether we're in a bull or bear market, whether the market is up or down
by our seller market, that's what's really going to determine what competition
looks like. Right now if there's a lot of homes in the market, then generally, you
need to fix up your house pretty nice to put it a cut above the others but you
also might be in a market where there's almost nothing on the market, like we're
in an economy right now where there's not a lot of inventory and it is amazing
that you can get away with way less work and people are willing to put sweat
equity in and so again, it's like, ok I'm ready to sell my house, if I sell it as
is I'll get a hundred and fifty for it but if I put 10 grand, I'll get a
hundred and seventy. Well how'd you like to make a fifty percent, hundred percent
return on a ten thousand investment? Put ten in and get your money back plus
ten more, that's a hundred percent return. So ARV this is, this is really
important real estate acumen when you're evaluating a project and
wondering, well when I buy it, maybe there's a good equity position but I
need to look at what that position is after I have brought it up to speed that
I need to and similarly when it's time to sell it, because you might rent it for
four or five six years then it's time to sell it, your lease
option comes to an end, maybe the people don't move forward on buying it.
Okay, number 18 real estate as a job. You know, there's a lot of people out
there and this is one of the worst scenarios I've ever seen, someone has
become a realtor or they're doing something in real estate, they're not an
investor but because they're swimming in real estate all day long, they actually
think that they understand real estate as an investor, when the reality is you
can have an immense amount of knowledge about the real estate market. Uh-uh!
That doesn't mean that you're a real estate investor, that just means that you have a
job in real estate and meanwhile, well you've got a job working 30, 50 hours a
week, investors, I mean often I sell a house like the home that I just sold,
I got paid a $20,000 check, my partner got a $20,000 check, I put in a total of two
hours on that deal which meant that I was making 10 grand an hour right?
That's real estate done super intelligent in our done-for-you system that I love
about it and yet, I just ran into someone that recently said, "Oh, my brother, you
know, I've been trying to get him into real estate but he's an inspector." And oh
sorry, no, she said he's an appraiser and I'm like, "Oh so he thinks he knows
everything." She's like, "Right." I said, "Does he own any investments?" No but when she
tries to talk to him about it, there's this, I know it I got it I have it all
figured out because you're identifying with it on a regular basis. Don't confuse
a job from an investment. - I've got to add something real quick to this. So I was
out in Denver, this is a couple years ago, we had some clients that were working
with us for a while, going through our system, doing some
amazing things and then they looked at me one day and they said, "Steven, I, you
know, we wanted to, we wanted to get into flipping." I said, we followed your system
we had great success bought several homes but we really wanted to
flip a house and they said, so we did flip a house and I said, well great, well
how did it go? They said, well it actually went pretty good, we ended up getting
this amazing deal, we put some work into it and we made about $25,000 on this
home and I looked at them, I said, that's great! And she kind of would look at me with
her countenance kind of shifted. She said, well it really wasn't that great. I said,
well what do you mean? She said, well we did the math. I said, okay. She said, yeah
that $25,000, after I divided all the time that I put into it,
all the time that my husband put into it, at the end of the day, we figured that
each of us made about $5.75 an hour. - Wow below minimum wage. - Now, listen to this,
I looked at her and I was kind of trying to jab a little, I wanted the
lesson to sink in and so I looked at her, I said, can I help you understand
something? You could have gotten a job at McDonald's and you could have doubled or
tripled your investment. Now let me ask you a question, is getting a job at
McDonald's, Kris, an investment? - No. - No, it's not. Neither is doing real estate
like a job. So if you're going to do a real estate, do it like an investor, don't do
it like a job. - Awesome Steven. Point number 19, you got to know how to crunch
the numbers. Now in real estate, that doesn't really mean that you have to be
some math nerd, that you need to understand how to do deep algorithms,
crunching the numbers at the end of the day really means I can take a look at a
deal and within the scope of my strategy, I can evaluate my profit centers.
Here's what that would mean if we're talking, for example, on a lease option.. It means
that I know what I'm buying the property for and what kind of potential equity is
there, it means that I can crunch the numbers on a minimum purchase price that
I may sell it out in the future so that I can know if I sell it in two years at
a price no lower than this how much I would make, means that I can factor in my
cash flow and my down payments, deposits, maybe even look at my tax benefits and
my repairs and if you can evaluate all of that and have a good realistic guess
on what the numbers are, you're prepared to actually move forward on that deal.
So if you want to be a successful investor, you got to know the numbers. Now I know
some of you were thinking, but Kris, I failed math. I'm really good at dancing,
I'm really good at sports or I'm really good at science, math, not so much. That's okay.
Have someone on your team that gets the math, don't blindly purchase a property
without knowing what it means to successfully have crunch the numbers and
understand your best hypothesis on the money you can make. Part of it is a
crystal ball, we don't know what the future is going to do but the right
strategy is something that can counter that by putting measures in safe for
good margins of safety and at the end of the day, if you're going to pull the trigger
on a property, you want to make sure that you understand enough of how you're
going to make money on it and what worst case scenario so that at the end of the
day, you can know, wow if things go really well, I might make 15% off
each year on my money for the next five years. If things go really well and I take the
market into account, it could be as much as 20% but if things don't go according
to plan and I have really high repairs here or if I have tenant, you know,
vacancies here, then my return might drop to 12%. Alright we got a high a 20, we
got a low at 12 and JB che, French economist 1800 said that creating wealth
is moving assets from low yields to high yields. So if you have money at 3% that
you can have worst-case scenario at 12%, then you did a good job there because
you're getting 400% more on your money. Four times more on your money with a
high of 6 or 7 times more on your money and that's crunching the numbers
is really how you ultimately know, when do I pull the trigger, how do I make good
decisions because ultimately, and I just want to
elaborate on this for a second, when I was reading Snowball Warren Buffett, you
got to the end of the book and he said, imagine that you only had a finite
number of investments you can make in life and he called it a punch card of 20
investments, if you're only going to make 20 then make sure that they are winners.
In crunching the numbers and having a philosophy will help you do that which
leads us to tip number 20. - Number 20 is the best strategy. Now look, I get it.
There are so many different resources that you can go to, there's been up to
10 million books that have been written about investing and real estate
strategies and all these different things and I'm guessing that you're
probably like us.. You want to know what the best strategy is right? So Kris and
I, we both worked for a company years ago, this seems like almost a different
lifetime, doesn't it? Years ago, where we were very young, on the
phone talking to people who were in their 40's, 50's and 60's that were calling
us saying, I'm scared to death because I've done everything right, I've gone
along this path, I've gotten the, they've got the schooling, got the job, making the
money and I'm looking towards retirement and it's not going to be enough. What do I
do? And they were asking us for that best
strategy and in the industry at the time, the strategy that was given was, well
what do you want to do? Well what's you what's your best idea and
they don't know that's why they're calling us.
So let's get real, what is the best strategy that you would say in real
estate? - And we put our foot down and we wrote a book about this, it's called
A Straight Path To Real Estate Wealth and at the end of the day, we were looking
for strategy that would meet these six criteria, least time least effort, least
risk, most profit, work in up and down markets and provide a service. You might
have noticed that the last video on the top successful tips, the first ten tips
all had to do with any of those six points, those were six of the things that
we talked about.. Least time, least effort, least risk, make the most money, working
up and down markets and provide a service and that for us really comes
back to lease options, a strategy where it doesn't matter what your credit is,
doesn't matter your age and doesn't matter how much money you have because
we're going to leave banks out of it, we're going to give your pocketbook out of it,
we're going to show you how to do creative real estate where you can buy
homes and if you have a home, this is a fantastic strategy of how to sell it in
time in the most profitable way possible so by the way, click the link up here and
have a chance to review some of what our best strategies and options look like
with and lease option because we can help any of you in the next 90 days get
your first deal under your belt and actually turn you into a real estate
investor, you should check that out because that's our definition of a best
strategy, now you get to decide for you what that looks like and we'll help you
out from camp. I hope you're enjoying this video series and if you're thinking
to yourself, "Man I'm learning so much about real estate and I just want to
jump in head over heels quicker and faster." Then I want to invite you to
click the link where you can get more immediate access to some of the
different ways we can get you rockin' out real estate because when I work with you,
I want to see you doing deals within the next 90 days. Otherwise, join us back
because the next video is going to be about the top 10 tips for my number one
all-time favorite strategy in real estate, the lease option.