Cash Flow Guys Podcast

Asking price does not matter For Sale By Owner Properties are overpriced Properties sold by wholesalers are overpriced Bank Foreclosures are overpriced Listed Properties are overpriced ALL off-market properties are overpriced and actually “on market” so stop saying off-market people All contractor bids are too high All Real Estate Commissions are too expensive All Lawyers are too pricey All closing costs are too costly All Lenders charge too much in fees All Banks charge too many fees Income Tax is a Ripoff Sales Tax is Theft Property Tax is a scam All Cable bills are too costly All water bills are ridiculous All electric bills are feeding a monopoly All new cars aren’t worth what they are asking All Hotels aren’t worth the nightly rate All meals at fancy restaurants are price gouging Mixed drinks sold at a bar are a rip-off, the price of a cold beer is crazy… Regardless, each and every one of us buys or pays for these things each and every day of our lives. Look at the property anyway, find the value, if there is none then go look at another.  Either way, if you allow the price of something to stop you in your tracks you will never cover any ground, you will remain stuck. Listen in for some great tips on how to discover opportunity regardless of the “asking price” of an asset.

This episode was born from a listener question in regard to what sort of questions should you ask when speaking with a seller.  For me, this was a struggle in the beginning because I didn’t have any points of reference to keep me on track.   Many years in sales taught me to avoid scripts if at all possible so I could better craft the meeting into a more conversational style.  I did not want to risk sounding like a robot, instead, I wanted to build rapport and ease into the conversation so that I could learn what I needed about the seller and their pain points without sounding like a lawyer in a cross-examination. As a result of learning to get better at talking with sellers, I created my property information form.  I looked at tons of examples I found on the internet and took bits and pieces from each one in order to craft one that best fit my needs.  In fact, I still use the form to this day in each and every Seller encounter.   To obtain a free copy of the form visit my website at CashFlowGuys.com and click on the resources tab for the download link.

It’s really simple...People can’t buy what they cannot find. Every minute of everyday people incorrectly spell things when listing items for sale. Find those items and you will find motivated sellers. This could be on eBay, Amazon, Facebook Marketplace, Craigslist, Offer Up or other online sales sites. Here are some examples of things I have bought at a huge discount because the ads were misspelled or miscategorized or under-advertised and then sold the items at a huge upside after marketing them properly.  By under-advertising, I mean limiting exposure to items for sale, being lazy, not telling the world.  This is a common mistake that Realtors and House Flippers make. I bought 6 sets of Halcyon Technical Scuba Gear being sold by a fire department on eBay.  All new and unused, no idea why they were selling, frankly don’t care.  The seller spelled Halcyon wrong so nobody bid on the auction.  The starting bid was $500.  I was the only bidder and won the auction for the opening bid amount.  ONE set of the gear was worth $1,900 alone.  I sold five sets for $1,500 each for a total of $7,500 and kept one set for myself that lasted me 15 years without fail. I once bought an FSBO property back in the old days when buyers and sellers were allowed to communicate and be in the same room..imagine that… In a casual conversation with the seller discussing what was next for her, she stated she now needed to get rid of her other four houses she had inherited.  Had I asked this question sooner in the buying process we could have been closing on 5 houses instead of one.  It turned out that the day before closing her niece announced that she was getting her real estate license and she promised her the chance to sell the homes on the open market so she could get the experience.  Needless to say, I lost out on 4 more listings and my client lost out on a couple more great deals.  And YES, I tried everything I could think of to sway her towards selling now instead of waiting to later to no avail. Back in the late 90’s I was walking through a parking lot behind a thrift store and noticed a bunch of golf clubs and bags leaning up against a full dumpster.  Inside the dumpster was loaded with baseball equipment, bats, batting helmets, catcher gear, and more golf clubs and bags.  I walked back home, got my truck, and unloaded that dumpster by hand into my truck in two trips.  My total take on that adventure was $21500 in sales with ZERO inventory costs.  It turned out the thrift store manager did not think used sporting goods would sell very well and he did not want to take time to clean the germs from the helmets, pads, and golf club grips (he was a germaphobe).  Over the next 6-8 months I went back to that dumpster twice a week at night before the pickup day to restock my inventory.  I wound up making an additional $50,000 from that same dumpster for a grand total that exceeded $72,000. Every time you see something that someone else does not want ask yourself this question….How can I make a decent profit from this item in a short amount of time with minimal effort?  Who do I know that would value this item or items more than me?  What specific steps can I take to find and notify that person that my item is for sale? Here’s the bottom line, there is an opportunity is everywhere around you.

Post credit to Alissa Walker and Wade Sutherlin, the lucky husband of Amanda Young who was my guest on episodes 172 and 173 A CONVERSATION ABOUT PERCEIVED VALUE: A customer asked a contractor friend of mine how much it would cost to do this project.  My friend gave him a proposal: $4500 The customer responded: That seems really high.  My friend asked: What do you think is a reasonable price for this job?  The customer answered: $2500 maximum My friend responded:  Ok, then I invite you to do it yourself. The customer answered: I don't know how to. My friend responded:  Alright, then how about for $2500 I'll teach you how to. So besides saving you $2000, you'll learn valuable skills that will benefit you in the future. The customer answered: Sounds good! Let’s do it!  My friend responded: Great! To get started, you are going to need some tools. You will need a chop saw, table saw, cordless drill, bit set, router, skill saw, jigsaw, tool belt, hammer, etc.. The customer answered: But I don't have any of those tools and I can't justify buying all of these for one job. My friend responded: Ok. Well then for an additional $300 I can rent my tools to you to use for this project.  The customer answered: Okay. That’s fair. My friend responded: Great! We will start the project on Monday.  The customer answered: I work Monday through Friday. I’m only available on the weekends.  My friend responded: If you want to learn from me then you will need to work when I work. This project will take 3 days so you will need to take 3 days off work.  The customer answered: That means I’m going to have to sacrifice my pay for 3 days or use my vacation time!  My friend responded: That’s true. Remember, when you do a job yourself you need to account for unproductive factors.  The customer answered: What do you mean by that?  My friend responded: Doing a job completely from start to finish includes time spent to plan the project, pick up materials, travel time, gas, set up time, clean up, and waste disposal amongst other things. That’s all in addition to the actual project itself.  And speaking of materials, that’s where we will start on Monday so I need you to meet me at the lumberyard at 6:00 am.  The customer answered: At 6 am?!! My workday doesn’t usually start until 8 am!  My friend responded: Well then you’re in luck! My plan is to start on the deck build by 8 am. But to do so we have to start at 6 am to get materials picked up, loaded, and delivered to your job site. The customer answered: You know, I’m realizing that a lot more goes into a job than what a customer sees in the finished project. Your proposal of $4500 is very reasonable. I would like you to handle the project. CONCLUSION: When you pay for a job, especially a custom job, (whether it’s a physical project or digital project) you pay not only for the material and the work to be completed. You also pay for: ✔️ Knowledge ✔️ Experience ✔️ Custom Skills ✔️ Tools ✔️ Time to plan ✔️ Time to prepare ✔️ Professionalism  ✔️ Work Ethic ✔️ Excellence  ✔️ Discipline  ✔️ Commitment  ✔️ Integrity  ✔️ Taxes ✔️ Licenses  ✔️ Sacrifices  ✔️ Liabilities  ✔️ Insurance  If you request a proposal for custom work to be done, please don’t disrespect a service provider by trying to get them to lower their prices.  If their proposal exceeds your budget, there’s nothing wrong with getting other proposals.  Just remember.. you get what you pay for.  👉🏼 SERVICE PROVIDERS: Know your worth and be confident in it. 👉🏼 CONSUMERS: Recognize their worth and be respectful of it.  Sharing this to support all my friends, family, and clients who are Entrepreneurs, Business Owners, and tradesmen.

The truly successful real estate investors and Realtors are the ones who are most skilled at solving problems.   Less successful people focus only on the deal or the potential profits. In this episode, I discuss the five most common examples of Real Estate Malpractice and how to avoid them. If you are able to avoid these pitfalls and learn why they are pitfalls, you will virtually eliminate any competition you might have in the marketplace. Always remember that your beliefs and needs are not identical to the seller’s beliefs and needs which means to understand the seller’s problem, you have to get good at asking questions. How do we get good at asking questions that are easy to answer?  We practice and learn by doing.  Listen in this week and add another set of tools to your investor toolbox.

In this episode, we discuss where to get started.  In this case, I am replying to one of our listeners who is just getting started in real estate.  He has done a great job so far getting himself lined up well to earn a profit now we will dive in and help guide him through the process.  I’ll be brief in the notes this week since I think you’ll get lots of value by simply listening to the episode.  Enjoy!

Once you make a decision to put yourself out there by marketing yourself to sellers, the next part (and often the most challenging) is knowing which leads to focus the most time and energy on. When I first started marketing, I quickly learned that leads of any kind don’t come for free, so I had to be careful to be sure I did not waste them.  By wasting a lead, I mean underestimating the value of a lead and therefore not putting much (if any) time into reaching them with my message. Honestly, I didn’t think much about the value of one lead over another.  I mistakenly thought that all leads were the same and therefore had equal value.  Soon, I realized how wrong I was about the lead evaluation process and it was then that I found out that I was throwing money away (literally, in the trash) When using direct mail in your approach it's common to get returned mail back when your mail piece cannot reach the seller.  This of course only happens if you a sure to include a return address on your mail piece (using a return address on your mail pieces is a golden nugget, you’re welcome). Over the years I have met thousands of investors from all over the world.  I often ask those who use direct mail what they do with the mail that comes back undeliverable.  I can honestly say that over 80% of the people I have asked this question to have told me that they remove the bad addresses from their mailing list and discard the mail piece. That’s it, in the trash it goes! Please know that the tougher it is to locate someone the better the lead quality is.  That’s because most of any competition you might have will give up at the first sign of difficulty in reaching the hard-to-find seller.  Think about the sheer number of people that talk about wanting to invest in real estate, buy the books and courses and never take any further steps.  The majority of people who want to be investors simply quit at the first sign of hard work.  The same is true for most things that lead to financial success. This reminds me of a situation that is going on right now with one of my students. He just did a mailing to his list of motivated sellers and received a handful of them back as undeliverable.  Taking my advice, he decided to skip trace those returned postcards to see if he could find a better address to mail his postcard to.  The seller had an uncommon name so he began the search by using good ole’ Google to see what he could find on the person.  Low and behold it turns out the seller was arrested for committing a double murder and is currently serving two consecutive life sentences for his crime.  Needless to say, my student now knows where this seller can be found literally for the rest of his life. Most investors upon hearing this would turn and run the other direction, but not my student, he is working through the problem until he can have the opportunity to sit down in front of this seller and begin to help him solve his real estate problem. Imagine looking through bulletproof glass sitting face to face with a cold-blooded killer! Worse, imagine negotiating the sale of an apartment building with one! The reality is that he has found a seller with a problem that likely needs a very unique solution.  This ladies and gentlemen, THIS is how creative deals are born. So far, he has used his Propstream account to search the property’s public records and recorded documents that the mortgage is current.  Further searching on Propstream revealed his lawyer recently filed a Lis pendens on the property which we imagine is a strategy to use the property as collateral towards the payment of legal fees of defending the client who is now in prison. In speaking with the prison officials, he was told that in order to visit the seller in prison he would need the seller’s authorization to accept his visit.  The next step is to begin writing letters to the seller in prison so that he helps him see the benefit of accepting such a visit. Stay tuned for updates on this real-world true story.  

Recently I listed a property for a client in the Tampa, FL Market.  Yes, I am still living in the Florida Keys, however, I have a real estate team in the Tampa, FL, and Key West Markets now. I often find it shocking how easy it is for Realtors to kill deals for their clients and for themselves.  I thought I’d bring value this week by educating you on the most popular way Realtors are blowing it this year. For those of you planning to buy in 2021 or ever again this applies to you. If you ever plan to sell any real estate of your own in the future this topic also applies to you. Granted, if I was to discuss every way Realtors, Buyers and Sellers kill deals this would turn into an 80-hour audiobook instead of a podcast. Tons of buyers are shopping before being sure they are fully qualified for a mortgage.  Clearly, if you are using 100% cash then this won’t apply to you. This week I have had several instances of this happening.  I believe every Realtor should know this already but since this week proves they don’t I’ll share with you what I mean about this.  It’s always a bad idea to show houses to people who have not proven they are approved to buy such a house, here is why. The Buyers fall in love with a house and later find out that their lender can’t get them approved for the mortgage due to credit or income issues. Make no mistake, buyers will fight Realtors tooth and nail on this because everyone is eager to go house shopping but your time is being wasted if there is no preapproval. Lenders sometimes give preapprovals that are useless. What do I mean?  I mean that the lender hands out a boilerplate approval letter (the same as they give to everyone) without first checking the buyer’s credit and verifying their income.  I’m not sure if they do this simply because they are lazy, or maybe they think the buyer is more likely to be loyal to them if they “think” they are approved quickly. When a buyer goes under contract on a home, the next step is usually to get a home inspection and termite inspection (the latter is more common in the south). Next, an appraisal is ordered which means by knowing the buyer has forked over around $700 to $1,000 to have these services performed.  There are no takebacks or refunds if they later find out they can’t qualify for a mortgage on the house.  If it’s a commercial property the bill is significantly higher. Before you go shopping for any real estate, be clear on how you intend on paying for it.  There’s nothing worse for a seller to take their home off the market only to find out a month later that the buyer is not qualified to buy it.  Lost market time can crush a seller’s equity and even destroy another deal they might be working on if they needed to sell in order to close on the next purchase. If you are raising private money, you should have more than one financial friend to work within the event the first investor or two flake out.  Consider closing on the concept with several financial friends.  By closing on the concept bring them up to speed on the particulars of your deal, how you intend to proceed, and then simply probe for their buy-in. Lastly, always offer a seller the option to accept payments for their equity.  Notice how I said that, instead of saying “seller financing” which terrifies most sellers, dumb it down to say payments for their equity.  This is because technically, the seller is NOT loaning you money, therefore they are NOT financing you.  Instead, they are simply accepting payments for their equity.

According to Hud’s Housing Market Indicators Monthly Update for January 2021,  40.3% of Mortgages in America are reporting as delinquent as compared to 28.1% at the same time last year (Comparing January 2020 to January 2021. 2,056,000 mortgages are considered seriously delinquent (which means over 90 days past due) Only 5% are in forbearance That means that there is a title wave of defaulted assets building up looking for a shoreline to destroy. What does this mean for you?  MASSIVE OPPORTUNITY! When the title wave hits it will be epic, beyond imagination and that’s not a conspiracy theory...that’s a fact! The Federal Government will likely extend the foreclosure ban when it’s up for renewal in an effort to plug a leak in the dam that’s only temporarily holding back the water. It doesn’t really matter whether you are for or against the foreclosure ban because it’s already happening, and there is nothing you can do about it, except PROFIT!. The mounting debt that is late mortgage payments won’t simply disappear. There will be no flick of a pen to put cash in the accounts of lenders, especially on privately held mortgages.  Big banks will likely get bailed out again but note investors could get wiped out. How does this spell opportunity? For starters, mortgages that originated in the last several years were likely written at very low-interest rates. In the lifetime of any mortgage, the value of the property that secures it will rise and fall and rise again, that’s undeniable. Origination is the most expensive part of a mortgage for the borrower, after that it’s just interest and principal payback provided it’s paid on time. Let’s compare it to buying a new car versus buying a used car.  When you buy a new car it’s estimated that it loses 10-20% of its value the very second you pull it off the lot.   Much more is lost if your negotiating skills are lacking or you become desperate to sell it. When you buy a home, it’s common to pay thousands of dollars if not tens of thousands of dollars for closings costs and commissions for all the support staff used to find, fund, and close the transaction. That money, once spent, is often considered gone forever unless the buyer waits for the property to appreciate to a level that absorbs those closing fees. As an investor, when you buy a property from a motivated seller you can often secure a significantly discounted price and save a small fortune if you buy with cash or private money. By private money I don’t mean the typical hard money loans you hear about at your local real estate meeting or club, I’m talking about financial friends you assist in funding your purchases for the long term in order for them to capitalize on a much longer-term gain than is typical with other types of structures. You can also “take over” the existing mortgage by buying the property subject to the existing mortgage.   Buying a property “subject to” means the underlying mortgage stays attached to the property and in the seller’s name.  The deed is transferred into your name which means you own the property but the seller’s lender has a lien against it in the form of a mortgage. Provided you stay current on the loan, it’s likely you can simply make payments until paid in full with no issue. Here’s a great time to hire a Real Estate Attorney that’s well versed in the process to assist you in preparing the contracts and disclosures necessary to inform the seller of how things are going to happen. Here’s an example of what I mean: Jimmy bought a house 4 years ago for $300k and put 20% down resulting in a mortgage in the amount of $240,000 which has a payment of $1,145.80 plus taxes and insurance. He is having a tough time keeping up with his mortgage, in fact, he is 90 days past due. Like most Americans, Jimmy doesn’t have $5,000 laying around to get caught up, and each month it gets worse. Today the payoff would be approximately $222,000 if you bought it today. Assuming the property appreciated 10% per year, that would mean the property is now worth $439,230. This means that over $200k net profit is a reasonable event after paying commissions and fees.  The only question that remains is, how much of that $200k are you willing to share with Jimmy and your team?  

Today we will uncover the most often overlooked critical detail when it comes to closing on your next deal.   Skipping this one detail could cost you thousands of dollars and possibly result in you losing ownership of the property you intend to buy. I am talking about the details found in your title insurance commitment, precisely the info found in section B 2 of the commitment where exceptions to title insurance coverage are listed. Before we dive in, I’d like to briefly explain what title insurance is and why you need it. Title insurance is designed to protect a buyer of real estate if any past issue relating to the marketability of title has been overlooked over the entire history of ownership for that particular property.   Title insurance only protects you in the event of PAST title issues, not future ones.  It’s designed to protect you from problems that may arise from things that happened before buying the property.   By the way, when I say “property,” I mean any real estate where ownership transfers whether it be residential or commercial, vacant land, whatever. What’s an exception? An exception is a specific item set forth that is not covered by the policy, which is excluded from coverage. STANDARD EXCEPTIONS.  Every commitment has standard or regional exceptions. The traditional Owner's Policy will not cover any defects in title, losses, or claims, which fall within the standard exceptions. Here are some examples of standard exceptions found on title insurance commitments: Municipal Liens (for things such as water, sewer, garbage service unpaid bills) Assessments for Water, sewer, streetlight, drainage, or other types of improvements arranged for by your local government. Unpaid Property Taxes Federal Tax Liens Court Judgments Foreclosure Proceedings Fines Rights of tenants as about specific unexpired lease backed rights Encroachments Boundary Issues Restrictive covenants such as deed restrictions or other restrictions that pertain to the use of the land Child Support Liens Please note that the actual value of any property, regardless of use, lies in the marketability of its title. To get a copy of a free cheat sheet put out by First American Title, go to cashflowguys.com/title If you buy any real estate piece without first obtaining Title Insurance, you are taking a huge risk! In many cases, if you buy a property from a wholesaler with a double close, you will not receive title insurance for the purchase, meaning you are entirely uninsured against issues from the past cropping up and ripping you off. In a perfect world, your Realtor should be reviewing the title commitment with you if you are buying a property.   If you are not working with a Realtor, then understand that the title company or closing Attorney is usually NOT required by any law (per se) to review these items with you or to call your attention to them. However, they must provide a copy to you, often buried in a mountain of other documents. Sometimes these issues will prevent a lender from originating a new loan that uses the property in question as collateral. If issues are found and NOT listed as exceptions to coverage, the title insurance policy will pay for legal expenses and any other related expenses to correct the title issue if it impacts the marketability of the title. When reviewing this document before closing, you can see that the title company and seller clear all the exceptions before closing.   Once the issues are corrected, be sure to either have a replacement title commitment created or insist that the one with the problem documented be “marked up” and signed off by the title closing agent/attorney. Once the item has been either removed or marked upon the commitment, you will have insurance protection if it comes up again as it relates to the marketability of the title.