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The Profit Newsletter - May 2015The May 2015 Edition of The Profit Newsletter is available for download just in time for our Atlanta REIA Main Meeting on May 4th. There are 44 pages of valuable information this month for your real estate investing success. Download it and check it out! The Profit is Atlanta REIA’s digital, interactive newsletter for serious real estate investors delivered as an Adobe PDF file to read on your PC, Mac, Smart Phone, iPad or other mobile ready devices. Many of the articles and ads in The Profit contain many hyperlinks you can click to get more information online! The high res version of The Profit is “print ready” for those who want to print the newsletter on their home or business printer. Be sure to Subscribe to The Profit by Email or Subscribe to The Profit by Text so you don’t miss a single issue.

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T.C. BradleyI first went online in 2003 and my first website sold over a million dollars of product. At one time, we were one of the most top ranked websites in the world. We actually had more traffic going to our website than Oprah had going to her website. (For you internet geeks out there, our Alexa ranking was a hair under 10,000 at the time)

Marketing has changed dramatically since those days. It is no longer good enough to be “found on Google.” Your competitors are there too. Today, more than ever, people have a choice of who they choose to do business with and they want to do business with the LEADER or Authority in their field.

If you have a serious legal issue, you want the BEST Attorney that money can buy. If you are selling your home, you do not want just anybody selling your home.

The Million Dollar question is this:

If I were to visit your website or social media pages, how obvious would it be that YOU are the Number 1 choice? Read More→

How to Make a Written Offer

Posted on April 30, 2015 by

Last Saturday, I took thirteen real estate investors from the Chattanooga Real Estate Investors Association door-knocking. Before heading out, we discussed how to make a written offer to a seller.

The group had a number of questions: 1) How do I find a property’s fair market value? 2) How do I discover market rents in the area? 3) How do I make a written offer right there on the spot?

The first thing to remember is that an offer is different from a purchase contract. A purchase contract is often a formal document written in legalese that no one – especially the buyer and seller – understands. On the other hand, an offer can be written in plain English on a Post-it note that makes sense to everyone! (NOTE: On North Georgia REIA’s Facebook page, you’ll see three of the written offers I made in Chattanooga.)

Randy Shelley is an investor who lives in that area. We spent the day knocking doors in his subdivision. Though he already knew the fair market values and approximate rents for his neighborhood, I asked him not to share this information with the group. Read More→

See It and Believe It

Posted on April 30, 2015 by

“Reality is merely an illusion, albeit a very persistent one.” ~ Albert Einstein

About a year ago, British Airways created an amazing billboard and put it near an airport. When an airplane would take off at the airport, the billboard would detect it. On the billboard, a little kid would follow the plane, pointing at it, until he ran past the end of the screen. When the plane was gone, he would run back into view. The billboard actually interacted with the world outside.

How did they do that? I have no idea.

If you’ve seen that billboard video, you’ve seen an example of “augmented reality.” (If you haven’t seen the video, you can find it by Googling “British Airways interactive billboard.”). Essentially, augmented reality adds digital content to real-life objects. The object could be an ad in a magazine, or it could be a famous painting, or it could be a house you just passed on the road. The essence is this: Point your tablet at it, and stuff happens. That stuff could be a link to a phone number, a video or animation you can watch, or other statistics about the thing you’re looking at. In the case of a house, it could tell you the price, square footage, and comps for the area. It could even give you a tour of the inside of the house. Read More→

Welcome back…again! Quick refresher: We’ve been discussing two classic & powerful, tried & true real estate investing strategies:

Wholesaling and Lease Options, aka “Ugly” vs. “Pretty”.

Part One of this series was devoted to Wholesaling, and Part Two was focused on Lease Options. Examples were given. Terms discussed. Money put on the table. Moving on…

Whenever a ‘newby’ investor asks me where they should start, I usually tell them that wholesaling is a great way to earn some great money while learning the business, so they should consider starting there. After a while, and when their marketing starts generating leads from pretty house sellers, I tell them that it’s a great idea to learn that part of the business so that they can start to make money from those leads as well.

It’s a beautiful thing when a deal fits easily into a ‘type’ of transaction we know how to do, and it’s even more beautiful when all the stars are in alignment & a deal closes smoothly. But we live in the real world here, right? Besides, we’re problem solvers, and that’s why we get paid the big bucks! :) Read More→

There are certain expenses a real estate entrepreneur will have in the business, and the more it ramps up, the more these expenses will increase along with revenue.

Fortunately for us, our overhead is extremely small. And when I say extremely, let me do a few comparisons for you:

When my restaurant was open, my break-even was approximately $100,000 per month. That’s just what it took to keep the doors open, including all the costs inherent in a restaurant and most other businesses like labor, insurance, utilities, product, etc. The food alone was $.40 of every dollar that came through the door. That’s a tough nut to crack for any business, especially when you’re dealing with small numbers like those found on your dinner check. There were many times I wish I could sell a filet mignon for $10,000 like we get out of houses with little overheard and very little work.

In the restaurant business, we’re open for lunch and dinner most of the time. There were always at least 12-15 people on duty with over 50 employees total, open seven days a week, and a manager or assistant manager had to be there 100% of the time. If that manager happens to be the boss, that pretty much sucks up that life. Read More→

We always hear how it is important to get a solid Buyers list whether large or small but ultimately of people that can perform. One such Buyer that is relatively untapped for wholesalers are Builders. These are in many ways some of my favorite Buyers because they can oftentimes pay higher prices than investor Buyers who have to hire them. Let’s take a look at why this is:

  • Builders can choose whether or not to pay themselves during a build process. If they choose just to get paid on the end profit, this averages a savings of 15-20% that an investor Buyer would have to pay to them.
  • Builders can save on their construction costs by not marking up anything. Investors are often billed a markup for these materials costs since they or their subcontractors have to source and pick up the materials.
  • Builders save on the overhead of timing. Time is money and a builder has less people to coordinate with to accomplish building a house whereas an investor has to manage more people.
  • Builders may do some of the labor themselves. Some of them just love to get their hands dirty no matter how good their crew is.
  • Builders may have their own capital. Many investors leverage private capital but a well funded builder may have their own capital, thus saving on interest fees.

When you start mixing some of these potentials savings together, you can see how they can pay more for a house than an investor can thus making the difference in having a deal done vs having no Buyer. Let’s look at a specific example. Read More→

The real beauty of owning rental property when the seller will allow you to pay them directly every month allows you to collect rent from each rental property you buy to pay for those properties.

The key to make this strategy work is to buy each income property so a tenant who will be renting the property will pay enough rent each month to cover 1/12th of the annual property taxes, 1/12th of the annual property insurance cost and at least 10% to 15% of the monthly rental income to cover the cost of the maintenance for that property when needed. This money for maintenance is set aside to pay for making the property look new when a tenant moves out such as new carpet, paint and any other damage to the property the tenant did during their stay. Also money for when the roof on that property eventually wears out, when the water heater eventually goes bad or the furnace or air conditioner breaks down and also enough money remaining each month to make the monthly payment to the seller and hopefully provide extra money each month for the owner to put into their pocket. Here is an example to show what I am talking about.

For this example each rental property brings in $1,000 in rent each month. This is the formula I use to determine if enough rent collected for each potential rental property to support itself and also provide extra income for the owner each month. Read More→

Real Estate at 10,000 Feet Up

Posted on April 30, 2015 by

I will never forget my first business/real estate mentor. I was set to taxi the plane out to the runway on a flight to Carrabelle Florida. My passenger for the day was a wealthy real estate investor and developer. I was flying him to FL for the afternoon because he was in the middle of developing a new condominium community on a prime piece of water front real estate that I had watched him negotiate and purchase a few weeks prior on a separate trip that I flew him to Florida for.

At this point my real estate career didn’t exist at all. I was a pilot flying for a medical supply company in Macon, GA. My passenger (Lee) was a friend of the owner of the company I worked for. The owner had invested in Lee’s next development and had given him access to the plane (and me) to take him down to the development site when he needed. At this point in time I was working on my flying career but I was slowly getting the real estate bug. Little did I know that in less than a year from that fateful flight, I would be completely out of aviation and full time in real estate, never to look back.

As we taxied out to the runway on a beautiful spring day Lee said something that would change the course of my life forever “what’s that button for?” Read More→

That sounds too good to be true! Guess who made this possible… The Supreme Court of the United States (SCOTUS)! There is a shockwave moving through the mortgage industry caused by a unanimous SCOTUS ruling in January. The court settled once and for all exactly what a borrower’s Right of Rescission is, and what latitude the courts have when dealing with it. The content of that ruling is a major win for homeowners and real estate investors alike, but what exactly does it mean for you and your business?

First let’s begin with what the Right of Rescission is. It was established by the federal government in the Truth in Lending Act (TILA). It gives a borrower the right to rescind any residential mortgage transaction within three days of the lender providing all of the disclosures required by TILA. The traditional Right of Rescission happens within 3 days of the closing and allows the buyer to cancel the transaction and get all funds returned by the lender. The Right of Rescission we are interested in is much more expansive. If the lender does not make the disclosures, or the borrower claims that the lender didn’t provide them, or the lender did not fully disclose the nature of the transaction, or the lender was fraudulent in their representation, the period can be extended up to three years after the borrower discovers the fraud. The bank must give up its claim to the property by providing the borrower with a cancelled note and mortgage and by returning every dollar the borrower has paid since inception of the loan. The lender has to respond within 20 days of the notice of rescission being dropped in the mail by the borrower. Read More→

Empower Yourself: Know Your Assets

Posted on April 30, 2015 by

People often ask me, “Russ, how do you stay so motivated, confident, and upbeat?”

My answer? I know my assets, and I make sure that I have more assets than liabilities.

Do you know your assets?

Knowing your assets will allow you to assess whether or not you are heading in the right direction. It will show you if you are winning or losing. I like to know what my assets are because it builds my self-esteem and feeds my ego. There is nothing like a good ego boost!

Here are the 4 types of assets:

  1. Physical/ Money
  2. Community
  3. Education/ Skills
  4. People

Physical/ Money Assets

When we think of assets, we typically think of money! But there is much more than that. There are physical assets. Read More→

In the real estate world, it’s all about income. Real estate IRA veterans know that if prices get too far ahead of rents, driving gross yields down, bad things happen. You don’t want to get caught up in the next bubble, trying to sell over appreciated real estate to some greater fool. Any time your entire investment thesis for residential real estate relies on future price appreciation without regard to income generated, you are on hazardous footing.

Smart real estate investors, then, try to maximize their yields on investment – that is, the amount of cash that comes in as a percentage of the amount invested.

Of course, individual properties vary widely when it comes to the cost of repairs and renovations needed to get them to work. But we can get a good idea of the health of a rental real estate market just by looking at gross yields – that is, income divided by the total current property value.

From that perspective, the market for real estate IRA investors looks strong indeed. RealtyTrac recently published its 2015 Residential Rental Market Report, aggregating rental income and price data from hundreds of metro markets, nationwide. The report comes on the heels of another report from Zillow.com reporting that rents have been increasing strongly, even outpacing inflation and household incomes. That’s not great news for renters, unfortunately, who have seen their fraction of incomes absorbed by housing costs increase from 25 percent to 30 percent in the space of just a few years. But it’s good news for landlords, who are reporting solid returns on investment in the vast majority of markets, nationwide. Read More→

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