Cash Flow Guys Podcast

Most Americans are in credit card debt, for many, it seems impossible to ever get it paid off.   Worse yet, a large percentage are focused on “Investing” while remaining in credit card debt at the same time.     In almost every scenario the interest being charged on the debt erases any net gains from money invested.   “Just pay it off” some say…but for many it's not quite that simple, but here’s a way to change all that.   In this episode I am going to show you how to boost your retirement account while helping other escape the clutches of credit card debt forever.   By following my advice in this episode you will likely enable yourself to earn returns far greater than you ever before imagined starting almost immediately.  Listen in to learn more.

In this week’s episode I will be discussing some of the major points of Joe Biden’s Tax Plan.   First off, most of the changes apply to those earning over $400k, even if you earn less than 400K you should know about these changes as they may impact your sellers and money partners.   Most of this info came from a YouTube video filmed by Ken McElroy and Ken Freeman (his CPA) which can be found at the following link: https://youtu.be/fsIYaFLYFpY   It's important to note that likely nothing will change in 2021 because of the time it will take to implement the plan and have it works its way through the legal system.   Corporate tax rates are currently 21%, The Biden administration plans to raise them to 28%, check with your CPA to see if this applies to you.   The Biden Administration also plans to increase the Marginal Tax Rate from 37% to 39.6% and add a Social Security tax to those making over $400k.   There is talk of a $15,000 First Time Home Buyer Tax Credit.  We will have to wait to see what requirements they put forth to qualify as a first-time buyer.  I say this because in the mortgage space, “First Time Buyer” means not having bought in the last fews years, but not ever.   There is discussion as to the elimination or modification of the 1031 Exchange program.  Does a 1031 Exchange make sense?  Ask your CPA to spell out the numbers for your specific situation.   Capital gains seems to be the biggest issue on Biden’s radar which allows the administration to tax the rich and give to the poor.  Again if you are not making over $400k, in my opinion there really isn’t much to worry about (yet).   Just because much of this may not apply to you does not mean you should not be paying attention.  Its important to understand the goals of the administration and stay focused on changes as they reflect to capital gains to pay for these social programs that the administration is promising.   What can you do to prepare for next year?, First, If doing your own taxes, hire a CPA that invests in real estate.  Second, be cognizant of HOW you earn your money and more importantly how it will be taxed. Take the time to schedule a tax planning session with your CPA that is based on the current situation and be prepared to adjust as new tax code is implemented.   With every rule there is an exception (usually) therefore learn to discover the legal loopholes and apply them if applicable.   Generally speaking, the government’s tax code provides more way to avoid tax than it does to apply tax, remember that.  Your job is to surround yourself with people sarter than you when it comes to taxation and building wealth.

Recently, America was dragged through one of the most important yet volatile elections in history.   Never before has our country been more divided. One thing that we can all be sure of is that we will certainly see lots of change over the next four years.  Some will despise the change, others will embrace it. Here’s what really matters...Your future success depends on your ability to make lemonade out of lemons. Yes, we will see radical socialist agendas being pushed down the aisle and likely made into laws that favor tenants over landlords.  The good news is that it takes time to pass new laws which will allow you (the landlord) to prepare for compliance or allow you to sell and buy somewhere else. Eviction moratoriums will likely be extended, if this impacts you, learn the law because you might be surprised to hear that there are exceptions to this ruling.  If you have non paying tenants, go talk with them, and discuss solutions.   Our country will likely continue to see record unemployment as both small businesses and big businesses continue to fail.  Maybe now is a good time to get better focused on the steps you need to take to get out of that job once and for all. As for being divided, focus on building bridges and mending fences with your political rivals.  Americas being divided was intentional by the system, they want us divided, lets show them we choose to take the high road instead and come together. Federal stimulus money seems to have dried up due to back and forth fighting between the republicans and democrats, when or if it will arrive is unknown.  If you refocus your energy on lead generation you won’t need any stimulus. I know you might be thinking that lead generation is the farthest thing from your mind right not.  I’m here to tell you that there are people all over the place that are far worse off than you might be right now, and you can help them while making money at the same time. In order to help anyone, you need to discover the problem properties in your community.  I have been using a new to me technology tool to accomplish just that.  With this tool, you will have both MLS and Public records data at your fingertips. Go to CashFlowGuys.com/data to get a 7-day free trial. You will be able to find pre-foreclosures, cash buyers, expired listings while having nationwide access to property records.  This software will help you work up rehab costs, find comps, and complete a market analysis without needing a realtor.  If you are a Realtor, this tool blows the MLS out of the water.

When markets are hot like they are now, many people find themselves getting outbid when trying to buy a house.  This is in part because many Americans feel that the opportunity to use lines of credit or to get loans to finance such purchases will likely go away soon or at least become more difficult to qualify for.  “Use or Lose” fear of loss feelings take over and cause some folks to buy even when it does not make sense. The news is talking a lot lately about the potential for a second wave of Corona Virus.  Many news outlets are reporting that there are a looming eviction and foreclosure crisis that will certainly play a part in crashing our economy. Uncertainty in the stock market has many investors taking to the sidelines by adopting a let’s wait and see approach. All of these factors have an impact on the current real estate buying cycle.  Even non-investors are scrambling to buy anything that hits the market in hopes of locking themself in now by buying while they still can. The most practical way to avoid being outbid is to buy what’s not yet for sale. By this statement, I mean marketing to a specific audience that has a compelling need to sell, yet is not yet listed for sale anywhere. Here are some examples: Expired Listings Lis Pendens Filings Property Tax Delinquencies Change Detection Eviction Filing Records Again, the best way to avoid being outbid is to situate yourself as the only available buyer by eliminating the competition. Tune in to listen to this week's episode to learn more about going direct to seller.  

Like many Americans, my mailbox and voicemail box is cluttered by multiple sales offers to install solar on my properties. First, let me say I love the concept of solar energy, in fact, I have solar panels and a large battery bank installed on our motor home which allows us to remain unplugged as we travel the country. I was originally intrigued by the concept of solar on my sticks and bricks property until I learned the downside of installing solar on a stick and bricks property. I thought that it would eliminate the chance of power outages for my tenants, but quickly learned that’s not the case.  This is because of how the systems are required to be designed when installed on a traditional home. The system is designed to harvest solar energy from the sun and feed it to the power grid.  The power company then monitors how much power your setup supplies and pays you in the form of credits to provide them with electricity.  They then provide your home with power from the grid but only charge for what you use that exceeds what you make and send them. I was told by all four companies I spoke with that when I sold the property, it would be worth more because it has solar installed, this is FALSE!  In speaking with several appraisers I was told that installed solar systems do not have any impact on the value of a home. One upside is that you can earn a tax credit for installing solar (more on that in the episode) Since it offered no benefit during a grid down situation and was grossly overpriced by the install companies, I passed on the opportunity to install solar on my sticks and bricks properties.  I did however install the solar system on my motorhome and therefore received the 30% tax credit.  In the motorhome, it is priceless since it means we don’t have to go to RV parks any longer since we can generate our own power. Tune in to hear the rest of the pros and cons as they pertain to solar on investment properties.  

Interesting legislation is being proposed in Philly… First, Allan Domb is a Realtor and the proposer of this new regulation, big shocker there. This legislation would require a “Wholesaler License” and background check to look for fraud, dishonesty, deceit, or violation of ethics laws.   This means that many wholesalers better change their tactics; clearly, there have been some antics happening in Philly to draw attention to wholesaling.  When you focus on finding houses for buyers and NOT buyers for houses (playing Realtor) you can avoid scrutiny When wholesaling, make offers and not estimates of values, after all, your job is not to appraise the house, it’s to flip the contract. This new law is basically assuming wholesalers are misleading sellers about the value of their home, which is completely avoidable.  Instead of haggling back and forth on a purchase price, focus on only discussing the net proceeds to the seller, after closing costs and mortgages are paid (if applicable).  This way you are discussing a significantly smaller number which means less emotion on the seller side.  By discussing seller net, you are NOT discussing the value of the property, after all...only appraisers are supposed to guess at value right?  Listen in this week as I dive into the nuts and bolts of these proposed rules. -Typical valuation tools do not allow for the condition of the property or the condition of title or circumstances surrounding the sale.  High risk means lower prices.

Real estate markets are on fire in many if not all, cities in the US right now.  When markets get white-hot, investors start rushing things and cutting corners to speed up the selling process. Before we get too ahead of ourselves, let’s review a few tips to make your renovation projects go smoother and avoid headaches. First, Always use licensed contractors and be sure they have good reviews and lots of them. Be clear on what the expectation is, prepare a specific statement of work.  This means you will list out each of the items to be completed by the contractor or vendor in a very specific way to include quantity, size, and color. If anyone discourages you from pulling permits for a specific job be sure to interpret that as a red flag and NOT a money-saving opportunity.  This is a common gimmick by unlicensed people who pretend to be legitimate contractors. When choosing colors, stay generic/neutral/ mainstream, don’t “experiment” or let anyone else do so on your behalf.  Be sure the colors you choose will appeal to the masses.  Wall paint? White / Off White or Egg Shell, avoid any daring colors.  Hire a project manager with experience in renovations to keep an eye on the job, they should be checking on all of the vendors and even the GC if one is used.  This is especially beneficial if you are a long-distance investor.  Perhaps your property manager would be a good fit for this task. Never pay in advance of work performed, ever.  Only pay as the job is completed.  You can set goals of progress and then possibly make small draws if absolutely necessary but still do your best to avoid these if at all possible. Lastly, always begin with the roof.  If you are selling a home, the age and condition of the roof will be heavily scrutinized by the lender and the insurance company.  Know the age of your roof, if it has 5 years or less life in it, replace it.  There’s nothing worse than rehabbing a house and then have it all ruined by a leaky roof.  Well, maybe having a buyer be forced to back out of a contract over the roof would be worse, you decide.  

You’re excited, you sold your first property...there you are at the closing table spending that check you are about to be handed...then...POOF! No Check! Why no check?  Because you failed to be sure the buyer was qualified to buy the property you were under contract to sell. Failed closings happen every single business day all across America even though this is an easy to solve the problem. Sometimes, irresponsible real estate agents fail to insist on earnest money deposits from buyers and their agents.  Sellers often don’t know that a good faith deposit is something that should be insisted upon. Recently, two different Realtors in Arkansas tried to convince one of my students that they don’t use earnest money in Arkansas...yep, you heard it right, people just sling offers everywhere with no need to put any earnest money in escrow..ever. What’s interesting is that their state contract specifically addresses the procedures for handling earnest money, even though these two agents swear there is no such thing. Folks, a contract without consideration (earnest money or something else of value pledged) is NOT enforceable in the United States. A buyer who fails to provide earnest money has no skin in the game and it’s quite likely they won’t close as promised since they have nothing to lose if they don’t close. Many wholesalers lock up properties under contract without earnest money thinking that’s fine to do, but if a seller decides not to sell to them the contract becomes non-enforceable.  Let this happen to you a time or two and I bet you will be all about qualifying your buyer.

Bay Lake Properties Tomahawk Properties Latin American Development & Management  RETLAW (Retlaw backward is Walter) Reedy Creek Ranch Lands was run by a guy named M.T. Lott (say the name quickly to get the joke) In 1955 Walt Disney has learned a powerful lesson upon the opening of Disneyland in Anaheim, CA by not buying a large enough parcel of land to build his theme park.  By the time he realized his error, neighboring parcel owners demanded a small fortune per acre to sell him more land because they felt Walt had deep pockets. In May of 1965 Disney started buying up land in the Orlando, Fl area to build what would later become Disney World.  Mr Disney was able to buy the majority of the land he needed for an average of $80.00 per acre.  He used Land Trusts to maintain the secrecy of the true buyer name.  Once word eventually got out, the price jumped up 1000% to $80,000 per acre.  Land Trusts are a great way to take title to a property while keeping the true owner’s information private.  Although not considered “Asset Protection”, land trusts make it more difficult to track down who owns the land and therefore is responsible if things go wrong.  By keeping your portfolio information private, slip and fall lawyers are less inclined to pursue legal action against you if there are no significant assets for them to attach. Land Trusts can also be used to keep a buyer’s information private to as not to alert the seller of a buyer who is well known or has deep pockets. If you want to learn more about using Land Trusts to acquire real estate Larry Harbolt’s next class is January 9-11, 2021.  You can grab your ticket at:  LarryHarbolt.com/LandTrust

This 2020 and 2021 could very easily wipe out many Americans financially.  The good news is that you can choose to avoid getting wiped out. Our inner voice will warn us of bad things happening in the future if we allow it to.  For that to happen we need to be listening. Many investors feel pressure to get a deal done.  Many will overextend themselves financially, usually by overspending or under earning.   The pressure to not disappoint a wholesaler, Realtor or Seller by saying no or asking more questions can prove to be overwhelming for many.  Don’t let people pleaser tendencies destroy you financially by buying a bad deal. Maybe you want to get accepted into the cool kids club at your local real estate club by doing a deal you know you should not do. Fear of missing out on low interest rates or even the opportunity to get financed for a deal can cause us to make irrational buying decisions. Easy to get hard money loans make it easy to wipe out your life savings by investing in sketchy deals where not enough due diligence has been performed. Maybe you feel lucky that a seller accepted your offer because you are “allowed” to do a deal. If any of this applies to you STOP! Wholesalers, Realtors and Sellers LIE about needed repairs, they LIE about current rents and future rent possibilities, They lie about ARV or simply have no idea how to compute the figure accurately, they conceal important details that might cause you to back out of a deal.  Its very difficult to catch them and even if you did, nobody really cares, nor do you have the time, money to waste trying to punish them.  This the simple truth. Your inner voice is likely speaking to you when things are not as they seem. It’s ok to question everything, that doesn’t make you paranoid or scared or even a newbie, that makes you intelligent and leads to lucrative deals. Distance yourself from anyone who makes you feel pressured to make an investment decision without having the time to do your homework. We are in unprecedented times, banks are pulling back funding.  That’s what we call a clue, soon it might be very difficult to borrow money from a bank for a purchase.  That’s a signal that market prices are likely to fall, when? Nobody knows for sure.  We are facing record unemployment, 2.25 million mortgages are currently past due, that’s the highest level since 2010.  Let’s not forget civil unrest and the most controversial election cycle in history.  Be smart, listen to your inner voice, do you homework and you will be able to prosper beyond your wildest dreams.