💰 How to get great real estate deals for ‘free’ 💰
Our real estate firm produced a gross return of ~$300k last MONTH and is growing by 70-90 houses per quarter.
We started with just 1 deal, and in this thread I’ll show you how.
Our real estate firm produced a gross return of ~$300k last MONTH and is growing by 70-90 houses per quarter.
We started with just 1 deal, and in this thread I’ll show you how.
1/ A few basics up front....
Real estate is all about “equity.” Equity can be achieved two ways (1) purchased or (2) created. Getting your money down to $0 is all about utilizing strategy 2 and creating your own equity spreads..
Real estate is all about “equity.” Equity can be achieved two ways (1) purchased or (2) created. Getting your money down to $0 is all about utilizing strategy 2 and creating your own equity spreads..
2/ Single family VS Multi family are valued differently...
Single family is appraised (location, comps etc) and multi is valued like a business (net operating income X a multiple which is your cap rate).
I’ll stay in the single family lane here because they’re easier.
Single family is appraised (location, comps etc) and multi is valued like a business (net operating income X a multiple which is your cap rate).
I’ll stay in the single family lane here because they’re easier.
3/ Equity CREATION happens in two ways: (a) Purchase UNDER-VALUE and (b) “VALUE ADD” post purchase.
Let me explain...
Let me explain...
3.1/ Let’s say you’re in a neighborhood that is B-class and every home in neighborhood is B-class except one property... it’s run down, outdated, and C-class.
There’s a good chance this property will be priced underneath it’s value. That’s strategy (a).
There’s a good chance this property will be priced underneath it’s value. That’s strategy (a).
3.2/ Let’s say the average price in the neighborhood is $200k but this house is $135k cause it looks like trash... the first number you need to know is your “allowable cost” for property. You get this by knowing how much you’ll need to spend to get it up to B-class (up to value).
4/ Rehab.
Getting the house up to value (because remember it’s priced undervalue) will require “value add,” which is strategy (b)... you’ll have to fix up some things and we need to know the cost required to do that... let’s do some math.
Getting the house up to value (because remember it’s priced undervalue) will require “value add,” which is strategy (b)... you’ll have to fix up some things and we need to know the cost required to do that... let’s do some math.
4.1/ Let’s say roof, HVAC, floors and kitchen, paint and exterior landscaping all need redone... and let’s say it’ll take $30k to fix it all.
$135k + $30k = $165k. Remember previous posts, you want to stay under 75% LTV. On a $200k house 75% would be $150k.
$135k + $30k = $165k. Remember previous posts, you want to stay under 75% LTV. On a $200k house 75% would be $150k.
4.2/ That means your “allowable cost” on this property is $150k ALL IN... rehab isn’t going to change..
So what needs to happen is the property needs to be negotiated... $150k - $30k rehab = $120k. That’s your allowable cost...
So what needs to happen is the property needs to be negotiated... $150k - $30k rehab = $120k. That’s your allowable cost...
5/ Negotiation.
We can get the seller down to $120k. Then we put $30k into rehab. Then we order an appraisal... this whole process will likely take 60-90 days.
Appraisal comes out and appraisals the home at VALUE (not cost) and sees everything is new — $200k appraisal.
We can get the seller down to $120k. Then we put $30k into rehab. Then we order an appraisal... this whole process will likely take 60-90 days.
Appraisal comes out and appraisals the home at VALUE (not cost) and sees everything is new — $200k appraisal.
6/ LENDING...
Debt structure is important - most ppl think debt is bad BUT, the mortgage is one of the greatest wealth building tools in the last thousand years...
Debt structure is important - most ppl think debt is bad BUT, the mortgage is one of the greatest wealth building tools in the last thousand years...
6.1/ The lender uses $200k as the value, and offers a 75% loan-to-value (LTV for short). That means they write you a check for $150k on a $200k property.
You have $150k in this house, and you recoup all of it 60-90 days in.
You have $150k in this house, and you recoup all of it 60-90 days in.
7/ Post-financing:
You have a $200k home, rented at ~$1500/mo, and a mortgage of ~$1100/mo... and paid essentially $0 to get this property.
Your return of $400/mo is an “infinite” return.
You have a $200k home, rented at ~$1500/mo, and a mortgage of ~$1100/mo... and paid essentially $0 to get this property.
Your return of $400/mo is an “infinite” return.
8/ Hard money...
What you’re probably thinking: “Yes but what about the original $150k to buy and rehab the home?”
That’s where private money comes into play. There are investors all over the world with extra cash and not enough return vehicles.
What you’re probably thinking: “Yes but what about the original $150k to buy and rehab the home?”
That’s where private money comes into play. There are investors all over the world with extra cash and not enough return vehicles.
8.1/ You offer them 10%, and a write them as 1st lien holder on the home so they’re protected.. and you will be able to “fund” the purchase & renovation of property without using your own money.
This is what we did in the beginning and still to an extent do this day.
This is what we did in the beginning and still to an extent do this day.
8.2/ Let’s do the math:
$150k x 10% = $15k annual yield (a cost to you, a return to the investor).
You use the money for 60 days while renovating the house PRE-lending... that’s $1,250/mo x 2 months = $2,500. TECHNICALLY, you paid $2,500 for a $200,000 house (1.25% down).
$150k x 10% = $15k annual yield (a cost to you, a return to the investor).
You use the money for 60 days while renovating the house PRE-lending... that’s $1,250/mo x 2 months = $2,500. TECHNICALLY, you paid $2,500 for a $200,000 house (1.25% down).
9/ If you wanted to, you could back out the $2,500 in negotiations...
Instead of purchase price at $120k, you negotiate down to $117,500 and it’s 0% down again...
Instead of purchase price at $120k, you negotiate down to $117,500 and it’s 0% down again...
10/ Don’t read and think “Sounds too good to be true”
Read and think “how do I learn.” This is how we started, and it happens every day in markets all around the USA.
The bigger you get the more money you’ll be willing to pay because you’ll have it. BUT -
Read and think “how do I learn.” This is how we started, and it happens every day in markets all around the USA.
The bigger you get the more money you’ll be willing to pay because you’ll have it. BUT -
10.1/ There’s nothing like a $0 down property for INFINITE returns on your real estate portfolio...
A few great resources to help you out on your journey:
A few great resources to help you out on your journey:
Enjoy...
And as always any questions hit me up and I will be happy to help you 💪
HAPPY INVESTING...
And as always any questions hit me up and I will be happy to help you 💪
HAPPY INVESTING...
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