I partner with my students on short sale deals and my Mentor students on all types of deals.  As a mentor, my students obviously learn the importance of negotiating as low as possible in order for us to get a good deal on a property.  But even after the student has negotiated as low as they can go with the Seller, I will walk through the house and tell the Seller that the price that my partner offered is too high.  I finish up by negotiating the property even lower.  Why?  Because my students are just looking at the front end of the deal and I’m looking at all the expenses to purchase the property, private or hard money interest and points, and the rehab costs for materials and labor.  In addition, I’m looking at the cost of insurance, taxes, and the utilities plus the hold time until we sell it, the cost of another Realtor to sell it should the student not conduct open houses/auctions to sell the property themselves.

It’s really hard for my students to see the entire back end of a deal when they are just focusing on the front end.  When we go to Home Depot, we must be aware of which features sell a home.  Kitchens and bathrooms sell BIG, so we spend extra money in those areas.  We get nicer cabinets, granite countertops, medium grade faucets and lights that all match the hardware throughout.  Recently I have negotiated and closed several short sales and straight purchases that need rehab.  I always stay with a neutral wall color (Behr Toasted Cashew – a light beige), flat white ceilings, and semi-gloss white around the trim and doors throughout.  The walls and ceilings are a knock down texture throughout for consistency.  Read More→

So in the spirit of John Schaub who spoke at Tampa REIA last month and his message – to “build wealth one house at a time” – it is now my new mission to do just that.  After 70+ wholesale flips in the last year and a half, I’m now fully comfortable with the fact that it’s time to get into “Buy and Hold” investing.  I know, I know – it’s sooooo NOT sexy.  True, but after hanging out with Larry Harbolt and Pete Fortunato and other “buy and hold” investors over the last 2 years, I finally see the light.

Now don’t get me wrong, I will probably always wholesale houses here and there, and today it’s still our Bread and Butter that pays the bills, but it’s time to build that cash flowing rental portfolio.  This is for our future nest egg, our retirement, our passive income that will pay our bills for the rest of our lives.  Any future excess money we make will go into rental properties (for the foreseeable future).  Crazy huh?

Have I lost my mind?  What has changed?  When I first started out in real estate I really didn’t want to get into rental real estate.  It just didn’t appeal to me.  I figured we could make our money doing Wholesale Flips, Fix & Flips, and Lease Option flips.  Well we can still keep doing that, but it’s time to put any excess money into rental real estate – or into private lending. Read More→

If you invest in real estate you have been told time and time again that the key to success and longevity as an investor is OPM, other people’s money. Whether you are borrowing the entire investment amount or just leveraging your own money you need to know the true cost of money. Some costs are obvious and known up front such as the points, interest, late fees, penalties, etc. but there are other costs that borrowers need to take into consideration.

When borrowing money to invest in real estate most investors first turn to hard money. If you are familiar with hard money you know it is expensive. Most hard money lenders charge 4+points or more and about 11%+ interest.  If you do the math this is an expensive way to go but it is a great place to start until you find better terms once you have experience. You should also keep in mind that most hard money lender’s terms are usually 6-12 months which should be much more than you will need if you have a plan and execute it, at the same time it does add some pressure. With these lenders you know what you are getting for the most part but what about the cost that you are told about but may not have considered, especially if it is your first time using this type of loan. When using hard money you are REQUIRED to purchase one or more of the following: survey, inspection, subject-to appraisal and/or termite inspection. These are great to have but the cost for each of these can get expensive if you did not plan for them. Many hard money loans if not all of them are also now requiring borrowers to pay/escrow at least 3-6 months of property taxes. Others have begun to charge loan servicing fees as well. Another cost to consider is the cost of each inspection done every time a draw is made from the repair escrow. I have seen an inspection repair draw cost anywhere from $150- $400 per inspection.  These inspection costs are done only when you request a draw from your repair escrow so it is in your interest not to request too many draws. Wait, there is more. Many people do not like to think about this but what if the term of your loan ends but you are still holding the property? Is there a fee to extend the loan? In most cases the answer is yes. Once you begin to add these costs and multiply them by the number of deals you want to do per year you will see the amount of potential profit that is spent on a few necessities and the rest wasted on garbage fees. Read More→

It is the goal of this column to answer questions about QuickBooks and how it is used in the REI arena. Knowing how to record transactions in the proper way and have your set of books in good shape when it comes time for taxes. It is our intention to do this with you, the members submitting questions to Karen@smallbusinessadvisor.biz, and getting answers here in this column.

Q: Where can I buy QuickBooks?

A: QuickBooks Software is available in most retail stores where computer software is sold. We recommend purchasing a CD copy of the software (versus a download copy) in case of computer issues later on. Warehouse clubs also offer competitive pricing.

Q: Can Quicken do the same thing as QuickBooks?

A: Quicken is specifically designed to handle personal finances while QuickBooks  handles small business finances. Each product is tailored (features, reports and workflows) to meet the needs of those specific audiences. Read More→