Cash Flow Guys Podcast

1031 is a tax savings tool that many Americans take advantage of every year.  A benefit to some, a nightmare for others.  Allow me to explain Before we get started…. I’m NOT a CPA or Tax Professional; the info herein is my opinion...wait, why do we say that?  What has ever happened to a non-CPA giving advice?  I have no stories to tell on the topic...if you do, email info@cashflowguys.com because I’m curious A 1031 exchange is a legal vehicle for deferring capital gains taxes. By electing 1031 exchange status when selling one property and investing in other investment properties, you get spared from capital gains taxes. (temporarily)  Why?  Because those taxes are deferred, not excused or forgiven… To get the facts on the 1031B program right from the Internal Revenue Service, go to irs.gov and search 1031 for further details. Let’s talk about deferment for a minute...  At the time of this recording, the US Debt Clock shows our current debt at almost 28 trillion dollars.  Our elected bottom feeders are about to add 1.9 trillion dollars to that in the next 30 days. This means the US debt is spiraling out of control, how will we ever stay afloat as a country?  Only one way...TAXATION!! Do you honestly think that taxes will EVER go down in the future?  Spoiler Alert, they won’t, in fact, they can’t.  So, if taxes are only going to increase over time, why would you want to defer your tax obligation to a future time when taxes are higher? The second thing to think about is the impact of being rushed on your decision-making ability.  In order to complete a 1031 exchange, you have to designate the replacement property or properties within 45 days.  Do you honestly think 45 days is enough time to find, negotiate and go under contract on a great deal?  No.. Likely, because you lack the time to do so, you will wind up buying out of desperation to “just get a deal done” while the clock is ticking.  Below we will get into the math.. By the way, “designating the properties” means a notice to the seller of each designated property.  The seller will need to sign the notice (according to the IRS.gov website). That’s not much time to put a deal together no matter what the economy is doing.   Is it easy to overpay when you feel pressured to make a decision?  Yep Head over to IRS.gov and search form 8824 and download the instructions, there is lots of good info here that you should discuss with your tax professional before proceeding. Let’s talk math for a second.   Using a capital gains calculator I found online, I entered the following information: Original Purchase Price: $150,000 Sale Price: $250,000 Annual Income of taxpayer $150,000 Filing Status: Single Capital Gains Tax: Approximately $16,900 (married taxpayer would have a slightly lower number) Have you ever lived there?  This is what the IRS says about that ”If the property given up was owned and used as your home for at least a total of 2 years during the 5-year period ending on the date of the exchange, you may be able to exclude part or all of any gain figured on Form 8824. For details on the exclusion of gain (including how to figure the amount of the exclusion), see Pub. 523, Selling Your Home.”  If You Choose to go the 1031 route… Step 1 – Find a 1031 Qualified Intermediary Like self-directed IRAs, you are required to use a qualified third-party provider to get the break from the IRS. They will help handle everything for you.  Step 2 – Identify The Properties You Will Buy Upon the sale of your assets, you have 45 days to identify what properties you will reinvest in. Not that you can locate multiple properties. You don’t have to close on them all. Step 3 – Close On Your New Assets After closing on the sale of the properties you are exiting, you have 180 days actually to close on some of the deals you have identified. Note that you can also use your funds to improve or even build new properties.

Currently, there is a Federal Eviction Ban in place until March 31st, there’s talk that will continue until September 30th and possibly beyond that date.   If you own income property as I do, such headlines certainly don’t help us sleep well at night, do they? Some of the people I have talked to recently are thinking about dumping their portfolios. Others are talking about allowing leases to expire and just keeping the units vacant until this blows over. Many buyers are beginning to second guess their decision to make a purchase until this blows over. Frankly, I think it's a great time to buy because never before have we had times so uncertain. Uncertainty breeds motivation in sellers. The biggest future challenge for buyers will be in obtaining institutional financing as lenders will likely pull back from lending on income properties. Now is a good time to hone your capital raising skills, you can do that at PrivateMoneyCrashCourse.com The eviction ban only applies to a portion of the population which seems to exclude many tenants who think they may be covered under this ban. Be proactive in open communication with your tenants in the event they fall behind. Yes, there will be a percentage of “Professional Tenants” that will try to use this situation to their advantage, but I feel that percentage will be a minor one. Recently, rental assistance stimulus has been passed and is available in many areas.  If you have a tenant falling behind i’d get up to speed on how you can apply on behalf of your tenant to get paid. Getting up to speed begins by calling your local state HUD office to get the ball rolling. Please know that there is TONS of misinformation out there to intentionally worry good people in times of financial crisis.  Avoid news websites, or any other non-official government information source when it comes to learning about the programs and how your tenants can qualify. Let’s not forget that this crisis is not impacting everyone equally which means there are still lots of good quality tenants out there that are ready, willing, and able to pay your rent. Now is a great time to access the value you are providing to your tenants.  It’s more challenging to intentionally screw over a good person, so be a good person and be sure you are providing more in use value than you are taking back in cash value. When talking to sellers, go ahead and bring the topic of eviction bans up in conversation and discuss it.  A polite conversation about this topic can serve to motivate a seller even more than they already are to unload their rental property sooner rather than later.

Turn key rentals continue to grow in popularity amongst beginning investors due in part to the belief that they are easier to acquire, manage and control. Although there are differing opinions on what is considered turn-key, it generally means that the purchase, rehab, and management as a rental is done by a third party instead of the individual investor having to do everything. While for many it's a realistic way to get your foot in the door to the world of investing the end results are often less than exciting. Ease of Acquisition:  Most people have a tough time putting deals together, they don’t have the time or desire to work their own seller leads.  To buy a turnkey rental you simply place a deposit and wait for your turn. The easier something is to buy, the more people are generally willing to pay for it.  This means that turnkey providers can often pack a hefty profit into each deal for themselves because people love the done for you model.  Such a practice means skinny margins for the end buyer. Proforma Returns: Turnkey providers often use proforma documents to outline the expected profits from owning the property they are advertising.  It's important to note that these numbers are rarely ever achieved and the actual returns are often considerably lower. You should do your own independent research to double-check the expected returns as advertised by the provider.  Call three property managers and ask them what the rent amount should be based on the specific address you are thinking about buying.  Ask them if they would manage it and how much they would charge.  Also, ask them if they would feel comfortable replacing tenants if the need arose in a reasonable time frame. Be sure to check each expense to verify its accuracy, often what’s listed is an estimate, sometimes it's just a guess. Repairs and Rehab: Always get a home inspection done, even if the property was freshly renovated.  Having a third party licensed home inspector to double-check everything and provide a report is a worthwhile minor investment.  Expect to pay between $400 to $600 for a home inspection on a single-family home.  Multi families will cost more and are usually priced per unit.  The inspector will be able to check and report on the electrical system, plumbing, HVAC, Roof, and overall condition of the property. After receiving the inspection report, be sure to have the provider take care of any needed repairs BEFORE closing, especially safety items such as those that involve electricity, gas, or structural issues. Summary: Turn-Key Rentals can be a good investment for those who lack the desire or skill to go at it themselves.  Because more people are involved in the acquisition lower returns should be expected but some return on investment is much better than no return on investment. Doing nothing will lead to your nest egg being consumed by inflation as time move on, don’t get caught up in that.

Knowing the appropriate time to make an offer isn’t something that most folks think about, however it is something that needs not to be overlooked. Putting out an offer too soon can often lead to instant rejection. Putting out an offer too late may cause the seller to think you are a tire kicker. Sellers often want us to make an offer as soon as possible, why is this? The urgency to receive your offer usually is because of one or two reasons, they are nervous about the selling process and want to get it over with as soon as possible OR because they suspect you might just be wasting their time. Have you ever been concerned about saying the wrong thing to the seller and upsetting or offending them? Does the thought of not knowing what to say to a seller make you a bit nervous? Everyone says to build rapport with the sellers, heck, I teach that too, but I realize it’s a huge challenge to build rapport with a stranger these days. Social Media, The Pandemic, and just plain everyday society make it more challenging than ever for many people to build relationships these days. In recent years humans have grown to be far more skeptical than ever of each other. Some gravitate to communicating via text messaging so they can avoid being face to face or having to speak spontaneously. Others use social media as a means to communicate. It is helpful to understand that being shy doesn’t begin and end with buyers, it’s a real issue amongst sellers too. Fear of confrontation and shyness is a huge part of why many homeowners hire Realtors to sell their homes for them.  For many, it’s worth paying tens of thousands of dollars to avoid a potentially uncomfortable experience. So how do we overcome these issues? One word….TEAM Sales skill is not inside of each and every human, it’s a rare breed that has the skill and enjoys the process.  Some people jump out of airplanes for a thrill, others? (people like me), we SELL! If you are not a Rockstar salesperson and feel you would not enjoy learning how to become that Rockstar, join forces with someone who IS a great salesperson. A great salesperson knows exactly when it is time to make the offer and close the deal. Why waste time learning a skill that you likely will never use and will ultimately make you feel uncomfortable in attempting? By bringing on a salesperson or “acquisition manager” you will garner far better lead conversion results than you could ever expect to achieve on your own. I know you might be thinking but wait! I can’t afford to pay a salesman right now.  I have good news for you, a Rockstar salesperson does not expect to get paid until they close a deal.  This means you can compensate them for the deal itself. Compensation can come in the form of a cash payment at closing, it can even be financed into the deal sometimes!  Wait, what?  Rabbit Hole Warning! Financed into the deal?  Yes, you can pay out to vendors in a deal at the closing table by simply adding the amount of the payout to the sales price and then having the payout listed as a disbursement at closing.  As long as the property appraises for the revised sales price if using a bank loan then everything should work fine.  It wouldn’t hurt to keep your loan officer/processor in the loop as to your intent so there are no “gotcha’s” to sneak up in the final hours before closing. You can bring your salesperson in on the deal and pay them a portion of the net monthly cash flow.  You could pay them a lump sum amount of future appreciation in a specified time frame.  I have paid vendors using a note and mortgage recorded against the property for collateral and then made monthly or annual payments to them. Want to dive deeper into this topic?  Then dig in by listening to this week’s episode.

In this episode of the podcast, I explore the specific criteria that make for a motivated seller lead.  Too often we waste time, effort, and money marketing to unmotivated sellers who are not interested in selling to us. Instead, when compiling a list of people to market to, deep dive into the available criteria to come up with a formula that will lead you to discover motivated sellers. As you might imagine, motivated sellers are more receptive to selling at a discount and also are far more likely to seriously consider creative acquisition solutions. Something as simple as choosing to market to vacant properties instead of occupied ones can make all the difference in the outcome of your marketing campaign. I also announce the names of the two winners of the one-year free subscription to Propstream.  Don’t miss this episode there is lots of value.  If you want to sign up for a 7-day free trial to get motivated seller leads, go to CashFlowGuys.com/Data

Today is January 1st, 2021.  It’s a new year that also marks the end of 2020.  This means 2020 is behind us. Nothing good comes from reflecting back on the drama of 2020. There is no need to look back on your past, instead, let’s get focused on the changes we can make moving forward to better ourselves and those around us.  If you have bad credit or low credit as some say, start paying your bills and correct the situation. Call your creditors and work out a resolution.  If you can’t work through this one problem I guarantee you will fail as a real estate investor because you will certainly encounter greater challenges as an investor than negotiating with creditors. If you are saddled with credit card debt, stop using them today and begin paying them off as fast as possible.  Dave Ramsey teaches Financial Peace University which will make it simple to get out of debt if you are willing to do the work. If you are under-earning, stop overspending and focus on earning what you are worth. If you are not earning what you are worth, change jobs, change careers or work more hours to get out from underneath the grasp of your creditors. You can fix your own problems, that begins with admitting you have a spending and/or earning problem.  Please stop lying to yourself. Do not leverage the equity in your home, it’s a trap that could leave you homeless. Learn how to raise private money instead.  If you refuse to learn how to raise private money you will most likely fail as a real estate investor because banks only loan money to people who do no need it.  Closing costs alone will greatly reduce and profits you hope to make in the first few years.  Don’t leave your financial future to be decided by some salaried loan officer making chump change as an annual salary. If you are about to do a deal, will it pay for itself?  Are you taking the opinion of those who stand to benefit by you proceeding with the deal?  Sellers Lie, Realtors Lie, Wholesalers Lie...facts are facts so verify everything. Embrace the idea that you MUST generate motivated seller leads to survive.  Nobody will bring a great deal to your front door ever, instead you will need to go out and seek motivated sellers. There is no such thing as a property that is priced right.  Everything is overpriced, always has been always will be so stop looking for a “great deal” to be advertised.  Finding a great deal has nothing to do with the asking price. Sellers, Realtors, and Wholesalers are not appraisers.  Also, the appraiser’s opinion of value doesn’t really matter either.  What matters is knowing if the property will yield the profit margin you believe it will, if not, you are not done negotiating. Don’t guess about anything in 2021.  Don’t guess as to why someone is selling, ASK Don’t try to guess what number a seller will say yes to...talk to them instead. Remove as many middlemen from the equation as ethically possible.  That doesn’t mean you should go around Realtors or wholesalers who have a written agreement with a seller, instead, market directly to non represented sellers yourself and filter them down such that you only speak to the non-motivated ones. The Bottom line is that 2021 can and will be your best year ever.  For that to happen, you have to give yourself permission to fail and continue to fail until you succeed.  You know right from wrong, you know what’s logical and what’s not.  You don’t need to invest tens of thousands of dollars into education to buy an investment property, instead, apply basic logic and you will far exceed your expectations.

In this episode, we are going to cover the old question of when is a good time to buy. Aunt Suzy doesn’t know… Social Media Lies... Brokers Lie... Wholesalers Definitely Lie… So who’s opinion do you trust on when is a good time to buy? How about your own?  When the numbers make sense and allow for a reasonable profit, then buy! For Rentals: Income minus expenses equals cash flow, if the end result is not acceptable to you, offer less for the property. Yes, you must allow for greater vacancy AND the time it takes to find well-qualified tenants who are financially secure.  Yes, you must figure in the cost of management because it’s a legitimate expense, even if you are brave enough to self manage. For Flips:  If the After Repaired Value (Verified by an appraisal) does not offer a significant profit after deducting the purchase price, repairs, and holding costs...don’t buy. Make your flip offer subject to an acceptable appraisal. Forget about what “the market” is doing or not doing….do the numbers as you see them today..make sense?  Will this property offer a fair and reasonable profit at the current purchase price? Don’t fear getting turned down, it’s part of the process.  Hearing “No” is a good thing, it means you are taking action.  After enough “No’s” the “Yes’s” will come

Meanwhile, while many people are spending countless hours lamenting over which catchy LLC Name, Logo style, and color they should choose for their real estate company, I have been busy building my business. How you might ask? By finding motivated sellers and marketing to those sellers right under the noses of any Realtor or Investor competition I might think I had. Here is how my day went...wakeup at 0630, make a cup of coffee, and get outside on the porch to experience the rising sun and calm surroundings.  I read the Wall Street Journal so that I can stay up to date on what’s happening in the world as it relates to financial markets and the psychology of the consumer. After all, while many people try to lie to themselves about how they are “not a salesman”, I wear that title as a badge of honor.  I am also a savage marketer...embracing it is what made me wealthy beyond my wildest imagination and what allowed me to retire to the paradise of the Florida Keys.  And for that, I make no apology. For me to earn any money at all, I first need to find problems to solve...that meant I needed to find two things, motivated sellers and money to invest with. Finding money to invest wound up being much simpler than I originally thought it would be.  So simple I made a crash course on the topic to show you how to raise all the money you need the easy way, without a big song and dance.  You can grab that course for a whopping $47.00 investment at PrivateMoneyCrashCourse. See what I did there?  I make no apology...if you want to watch the sunrise in paradise, spend the $47.00, do the work, and move in next door. Back to my day…. At 10 am I figured I would be productive since my fishing reels won’t be ready at the repair shop until 1pm.  I decided to put together a list of motivated sellers to market my services to.  As a Realtor, I can either buy their property myself or help them sell it...either way, I make money and get to help them solve their problem. So...I pull a list in my local zip code of pre-foreclosure properties.  I click list Automator so that if any of these sellers work out their financial situation and are able to escape foreclosure I don’t waste their time or my money marketing to them.  Notice I did not mention the waste of my time?  That’s because finding them took me less than five minutes. I then skip trace them within my system (learn more at cashflowguys.com/data where you can get a free trial and possibly win a whole year of the service for free). Now that they are skip traced I have the seller’s mailing info and name, a phone number, and an email address to work with. Next, I invest 15 minutes in creating a landing page for sellers who choose to go online to communicate with me. Now I go over to the campaign section, find a “done for me” postcard from the list of options and send it to 747 contacts in my database.  This part took 12 minutes. It’s now 10:27 am and I am literally marketing myself to 747 people as often as I want for less than the cost of a dinner for two. If I want to go crazy and hit them by direct mail, email, AND phone?  I can record a one-time voicemail in Propstream and send it off instantly to all 747 people for less than I will spend buying lunch today. This all begins as CashFlowGuys.com/Data what are you waiting for?

Make no mistake, it's a brave new world, new situations come with new consequences.   Understand this….Buyers / Sellers / Realtors / Wholesalers / Flippers CAN be sued related to Covid cases impacting those they do business with.   There is no catch-all set of laws covering Covid and possible litigation that can come from it, each jurisdiction will be different (so far as we know right now).  There is so much unknown it is becoming ever important to start looking at ways to protect yourself from possible liability.   Remember, even though you might likely win your case, you will still end up wasting thousands of dollars and too much time defending yourself from such a lawsuit.   To begin,  let's talk about disclosure…Article 2 of the NAR Code of ethics addresses agents making proper disclosures…if you are an agent, might want to familiarize yourself with this again...what if a seller has or had covid? Do you need to disclose that? could you be sued for not disclosing that? Maybe…is the easy answer   What about privacy laws, would you be violating any privacy laws protecting the infected person and therefore subject to lawsuit?  I discuss a few different scenarios in this week’s episode that you need to consider and then hopefully take the steps to protect yourself and your business from such hassles.   I am doing my first FREE GIVEAWAY, yes, that’s right, I am giving away an entire year of access to Propstream’s nationwide MLS and Public Records software to two lucky listeners.  Here’s how you can enter to win...   First, type in Cashflowguys.com/data in any web browser and sign up for a 7 day free trial, next,  email me at info@cashflowguys.com telling me why you feel you should win a free YEAR of access to Propstream $1200 value and how you will use the product to change your life.     I will pick two luck winners from the list on the first episode that airs after December 31st so don’t delay getting signed up.

Have you ever been told "you're not listening to me"   Have you ever felt someone you are talking to is not listening to you?   I notice this more and more every day in society, so much so that I wonder if anyone is listening.   Perhaps social media is to blame...   Maybe it's lackluster parenting skills...   None the less, not listening to other people is one of the biggest failures in communication that we experience in modern times.   I never thought much about this until I joined Toastmasters many years ago.    While a member is giving a speech, others in the meeting are specifically assigned to listen to them speak and count the bridge words, audible crutches, and so on.    For me, this became a very powerful lesson.   When we are interrupted by someone we are speaking with, over time it can become annoying, more importantly, it can become very distracting.   I meet people often who I can barely speak with because I am left feeling I cannot get a word in edgewise.   When lines of communication are shut down, not much good comes from it.    In real estate, it can mean mistakes, misunderstandings, miscalculations, and sometimes it can even kill a potential deal.   I have said for many years that the best deals come from solving problems.    When we have a tough time paying attention or listening, we will overlook problems altogether and find ourselves having a tough time raising money or putting deals together.   How do we fix this?  First, join Toastmasters, it's under $100 a year to join and worth every penny.    Second, practice listening intently, and practice asking questions to fully understand the situation being explained to you.   When talking to a buyer or seller, take time to learn why they are buying or selling, you might be surprised to know that most people have several reasons for buying or selling, knowing these reasons will help you put together great deals.   When the other party is talking, become laser-focused on understanding the actual words they are saying, and if you are unclear on what they mean, ask questions for clarity.    No matter what, don't try to guess what they mean, ask!   Sometimes I will ask the other party if it's ok if I take notes, especially if I am having trouble understanding them.  I have yet to have anyone say no, perhaps because I explain to them that I want to be sure I fully understand their situation fully and don't want to forget anything they are saying.   Becoming a better listener can completely change your business for the better while bringing you more revenue than you can imagine because people will flock to you when they feel you have something to offer them.