Cash Flow Guys Podcast

In this, the 300TH episode of the Cash Flow Guys Podcast I sit down with J Massey of Cash Flow Diary to discuss the amazing possibilities that can be had by investing in Short Term Rentals.   As a student of J's Jill and I have built an incredible STR business that allows us the freedom to run it from anywhere in the world.   Recently, we relocated to Key West, Fl to begin buying up long and short-term rentals in this market. With the help of Mike Marino of LayoverMoney.com we plan to revolutionize the traditional methods of syndication investing by building a streamlined, highly optimized investing opportunity for our investors. If you want to learn how to grow your very own short term rental business, you can get started today by texting "blueprint" to 949-506-5255 As a student of CashFlowDiary myself I can tell you that learning this skills will prove to be absolutely life changing if you choose to do the work.

In this episode, I talk with my investment partner Mike Marino and our CPA John Hartung for the Cashflow Capital Investment Fund we have opened recently about the pros and cons as it pertains to investing in syndications of all kinds. We discuss the several ways a syndication or investment fund is taxed and also how the individual investors are taxed. Did you know it's possible to achieve a zero tax rate without being Jeff Bezos?  I didn't but it certainly is and John discusses how that is possible amongst many other juicy tax strategies in this episode that you're not going to want to miss!

Lately, I’m seeing signs of supply chain issues that could potentially impact the income I make from my rental properties and other real estate deals. In this episode, I break down what I am seeing as it pertains to labor and materials shortages and how that can impact all real estate investors worldwide. Don’t underestimate how the current and upcoming shortages can and will impact your business.  I am hearing more and more reports daily from friends and colleagues who are having trouble finding even the most basic supplies to maintain their rentals or finish flips.   Experts are saying the shortages will likely worsen before they get better so why not take a minute to access your position and take appropriate measures to protect yourself and your business.

The term equity multiple is used by syndicators/deal sponsors as a fancy way to discuss return on investment. Google Definition: Equity multiple is a metric that calculates the expected or achieved total return on an initial investment. It’s calculated through an equity multiple formula that divides the total dollars received by the total dollars invested. Equity Multiple = Total Distributions / Total Invested Capital Example 1:  An investor purchases a property for $100,000;  The property is sold for $200,000.    The deal produces a 2x equity multiple.  If the investor only receives $150,000 back, the deal delivers a 1.5x equity multiple. Example 2:  An investor purchases a property for $100,000;  The property pays $7,000 a year in net operating income;  The investor sells the property for $165,000 after six years In this case, the equity multiple calculations would be $207,000 divided by the initial purchase price of $100,000, or a 2.07x equity multiple. Example 3:  Leverage Example:  An investor purchases a property for $100,000 The investor used a loan for $50,000 and put $50k down The  property pays $7,000 a year in net operating income The annual interest payments on the loan of $2,500 The investor sells the property for $165,000 after six years In this case, the equity multiple would be 2.84x. While leverage can amplify returns because the cost of debt is cheaper than the cost of equity, it’s important to remember it can also destabilize a project and amplify losses. Equity multiple is an easy comparison tool because it provides a quick glimpse into the total profit investors can expect to earn on a particular investment, provided its successful.  Keep in mind that it’s dangerous to put too much weight on this metric when deciding a go/no go decision because this metric does not factor time.  Internal rate of return DOES consider time in the calculation yet like other metrics also has its shortfalls.  True IRR cannot be considered unless the asset has already completed a given cycle of performance and has been exited. 

Earnest money is defined by Google as “money paid to confirm a contract” and in my opinion, is one of the most important elements of putting a deal together. In Florida (and I believe in all US States) for a contract to be considered enforceable, there must be “consideration” which is most often meant to be some sort of cash deposit or earnest money Wholesalers are notorious for not using earnest money when they attempt to go under contract with a seller on their home, this is a great way to lose deals! Many folks will tell you that it’s not necessary to use earnest money which will come back to bite you the minute a seller decides not to sell to you or honor your contract. In this episode, I cover how to use earnest money to win a seller’s approval on your offer over others which is critical in this very competitive market

My oh my, what a week! There I was watching Uncle Joe on C-Span tell me that the eviction ban is over and that there have been legal challenges brought forth by the Supreme Court declaring the ban unconstitutional. He then said that it's unlikely the views of the Supreme Court would change. As a reasonable person with average logic skills, I took this to mean that the eviction ban was finally over...boy, was I wrong. As you might know, the CDC created another eviction ban even though they (and President Biden) acknowledge it's probably not going to hold up in court. So with that news, I reached out to my team of experts, and that's why Attorney Shawn Yesner of Yesner Law is my guest this week to help us unwind this situation. As usual, the #YesnerWins team does a great job helping us navigate these shark-infested waters. So listen in to learn what to do if you have a non-paying tenant this year.

When analyzing potential deals there are lots of different formulas you can use to see if a deal with worth pursuing. All of these formulas depend on accurate data to generate an accurate end result.   The 1% Rule - Defined as the expected monthly rent divided by the ARV or After Repaired Value of the home. This rule is what I nickname the "Bigger Pockets Rule" because if you use this you will often find more room in your empty pockets due to the money being removed from those pockets. The rule can be helpful as a loose guideline to measure a potential investment opportunity however much more diligence and details are required to make an informed decision.   Potential Problems:   Is the monthly rent figure actual or estimated? Estimates cause the end result to be inaccurate. Sellers, Realtors, and Wholesalers tend to estimate income and expenses more often than not, which means your end result will not be accurate and can only be viewed as a very loose estimate.   Valuation in ARV, who determined the ARV? A Wholesaler or Realtor? Maybe the Seller themselves? If the after repaired value is estimated the end result is pretty much useless because most people won't get an appraisal done at this stage. As a buyer, you should maintain control over this data point. Only consider data that is applicable to the type of property being considered.   How to determine ARV :   Single Family Homes - Only use sold comps of "like-kind" properties. An example of a like-kind property would be comparing a 925 square foot home to a 975 square foot home, both having two bedrooms, located close to each other, and have similar lot sizes and amenities. It's real easy to get sloppy on this section especially when you want the end result to be higher to make you feel better about the deal.   ARV is generally used in a flip-type scenario, does not apply or matter if the property is an income property.   To determine the value of Multifamily, Office, Storage, Hotels or other income properties- Use Gross Rent Multiplier or Cap Rate   The formula to calculate GRM is: Property Price / Gross Rental Income = Gross Rent Multiplier   The formula to calculate Cap Rate is: Net Income / Purchase Price = Cap Rate   Calculating these figures using estimated numbers will always yield inaccurate results.   The real question is, should we go forward into negotiations and due diligence or not?   We can't pay a seller based on what a property "will do" but we certainly can pay based on what a property "does do". Listen in for tips on how to use these formulas in the way they were intended so that you can analyze more deals faster with lower risk.

In this episode, I interview Kyle Rodgers of Botfox about how to leverage a little-known, under-the-radar method to find motivated seller leads and cash buyer leads. When Kyle got started wholesaling, he quickly discovered that generation can get expensive really quickly.  Also, he discovered that it takes a great deal of time to generate leads when you are going at it all alone.  He needed to figure out a way to generate high converting quality leads without breaking the bank and without working lots of hours to get them.  That’s when Botfox.net was born. Kyle cast aside all other forms of marketing and doubled down on teaching himself how to use Facebook groups to find cash buyers and motivated sellers.  He then wanted to scale his business but knew that was impossible by himself.  It was then that he developed his proprietary training system to teach others how to generate leads for him! Kyle has put in the work and sweat to develop the Botfox system which is what he uncovers in this episode you won’t want to miss.

There comes a time in every investor's lifespan when it just seems time to give up.  Although for most, I wouldn't agree, but for some, perhaps they are correct in arriving at this decision. Here's what I mean... We all know the riches and fame that can come from being a real estate investor, blah, blah...but it can also destroy people faster than it can make them a rockstar. Real estate investing is something that attracts people of all financial classes, rich and poor.  The problem is that many of the poor investors have yet to develop the personal financial discipline necessary to be successful in real estate. If you're having a tough time making ends meet month after month, real estate won't usually save you, in fact, it will likely make things worse.  This week I expand on this thinking and offer solutions to help get you on track in the future.

Recently I was attending YouTube University by watching a suggested video on my feed titled “Zillow is Manipulating The Real Estate Market, They Need To Stop”.  I’ll admit, the title was a great hook that sucked me into watching the video.  The host of the video spent the entire 18+ minutes whining about how unfair Zillow is being by buying up properties from the market and reselling them.  I suppose that’s one view on the situation… Frankly, I find Zillow’s project brilliant, they were able to secure funding capital for 3% give or take and are buying up these properties in great markets around the country and making a fortune on volume sales.  Instead of complaining about their methods, I’m going to watch and learn how they are doing this and replicate it. It’s easy to cry foul these days, there’s always someone in earshot that will commiserate with your pain and join you in victimhood, but imagine the possibilities if instead of complaining about it, we simply learned how to make those profits for ourselves….after all, I’m sure Zillow would enjoy a bit of competition in the marketplace so with that said...let’s go make some MONEY!!