Everyone Tom Cafarella here from Ocean City Development today
We're going to be talking about how to make money in real estate and for those of you
Who are on the call right now? Just jump in and type into the comment section where you're geographically located
And we're going to be talking about today the exact
Formula if we've used in our Boston based business to fix and flip over
100 houses per Year
accumulate over 300 rental units and grow a one hundred and fifty person brokerage in the last
18 months and some of the stuff I'm going to be talking about are kind of the secret sauce that we've been
formulating over the course of the last ten years and
how to merge the real estate brokerage business
With the real estate investing business, and so what we do we take a combined approach where we're merging
four different ways to make money in real estate in order to maximize our
Profits so for those of you who have ever talked to me before the biggest thing that I talk about all the time is
how to properly
monetize
Motivated seller leads so at the end of the day the quote that I have behind me
Ultimately the business that can spend the most to acquire a customer
win and
What that means at the end of the day is if you can make the most amount of money?
Per dollar that you spend you can outspend your competition and when you can do that
You can have an enormous marketing budget
and that is the key to
Making a ton of money in real estate and so the way that we make money in real estate are four
different ways and the first that I'm going to be talking about is actually the reason why I got started and
interested in real estate investing to begin with which is buy and hold rental real estate and
Going back to 2003 was actually the first time that I ever red and got interested in real estate investing
when I read the book Rich Dad poor Dad by Robert, Kiyosaki
and that's actually the book that kind of got me really really super interested in real estate and
One of the things that they mentioned in that book which is true us come to find out that
it's one of the most interesting things about real estate in general is that
even a person with average work ethic an
Average or sometimes even below average intelligence if you just continue to accumulate enough
Rental properties by default you will end up being financially free and you will end up being wealthy
Okay
so that's what got me first interested in real estate investing to begin with and so
that's the number one way that we make money and over the course of time the plan is to accumulate as many rental units as
possible now where we're at
Unfortunately where we're at in the real estate market today in the Boston market
Is that it's really hard to accumulate rental units that still cash flow so what we're doing
Locally is we're just patiently waiting. So we're stockpiling cash on the sidelines and
Waiting for that market to start turning so that we can go really hard back into the long term buy and hold
element of the business and so um
The second way that we make money in real estate and where we make our quickest money is on our fix and flip deals
Okay
so I actually never thought that I would ever be a fixing flipper because
Again from the first couple of books I read everybody that talked about real estate
flipping talked about real estate flippers as being speculators that
I have come to find out is not true. Okay?
So I'm going to break down a couple of myths about flipping real estate
And why some people think it's Risky and why at the end of the day?
We do it with very very little low low risk, okay?
So the first thing to keep them is that the real estate market in General is very
Slow to act so you can sell off an entire stock portfolio in less than ten minutes
To sell off an entire real estate portfolio takes time so real estate market when the market
Starts to come back up. It's slow and also when it starts to come down
It takes a little bit of time, so the key in today's market and again
We're talking June 2017 is to make sure that you're doing very very
quick turn six and flip deals, so in order to Avoid
Market risk in General you want to make sure that your average project length is under three months
Because we are getting close to the end of the real estate cycle right now
So you want to make sure that if you are?
Fifteen if looking you're doing things that are really really quick so that you don't absorb any of that market exposure
when you're doing a project that is under three months in time, you're
Effectively buying and selling in the same exact markets you're buying in the next market
And you're not selling in a different market now if you're talking about doing ground-up construction which can take a year
Sometimes eighteen months between getting something permitted and getting it finalized
You are then taking market exposure and when you're taking on market exposure if the market of course goes up
You did pretty well for yourself if the market goes down you're going to absorb that negative downturn so anytime
We're fixing and flipping something. We want to make sure that we're doing it in the same market for those of you
Who are on the line who are real estate investors? Who are currently flipping?
Cutting to the comment section what your average length of time is for a fix and flip that you're doing currently in this particular market
And by the way even if you're watching the video after the fact do me a favor and type into the comment section
I'm just curious to know what how long people are taking to get their properties turned around okay?
So the first way that we're talking about making money in real estate with buying hold and I'm going to talk come back and talk
a little bit more about that after the fact the second way is
Fixing and flipping like I said, I never thought I would get involved in fixing and flipping at all
but when I learned how to do it with very very limited risk um
That's when I really started to pile into it the third way that we make money is
similar to fixing and flipping
except we're not actually taking title to be deal, and so we're doing that by a
Means called wholesaling and for those of you who are not familiar with the concept of wholesaling all?
Wholesaling is is when you put a property under contract for a great price again in order to wholesale
You need to get a great deal
So you're putting the property under contract at a great price and then you are finding another investor?
Who is actually Willing to pay you to?
take over that deal and that
Investor that you're selling the contract to is actually the person who's closing on the deal
And who's paying you to be in that deal my very first deal?
Which actually got my real estate?
Investing career started was a wholesale deal and it was one of the best deals that I ever did it was a two-family
Located in the city of somerville which is about no no two or three miles outside of Boston
At this point. It's almost practically considered Boston and we put that property under contract for
$300,000 and it was a two-family in kiel square, which is a very desirable area of somerville
and this was this was going back quite a way, so
You can't get anything till square for even close to that price at this point?
But what we did was we put that property under contract for 300,000 and we initially planned on
Considering fixing and flipping the deal
But at the time we were a little bit inexperienced. We didn't feel
110 percent comfortable with doing a project of that magnitude to start
so what we ended up doing was we ended up selling that contract and
Double closing, so when you're wholesaling a deal, there's two ways that you can do it
You can either double clothes, which is when you're doing two
simultaneous
Back-to-back closings on that project so what ends up happening?
Is that you go to the closing table?
And you end up buying the property from the seller and then you end up selling it to your end buyer?
Your new investor on the same day
And if you have a good attorney, they will allow to do that allow you to do that without
transactional funding, but you definitely need a good attorney who is
Willing to understand the type of transaction like that and willing to let you do it
The other way that you can wholesale a deal is
simply by assigning the contract and what that means is that you're you're getting a
Property under contract with you and the seller and then you're signing typically a one-page document
With the end user what the end buyer?
To pay you a fee for that deal um
David Thomas out of Florida. I don't know if you can do back-to-back closings in Florida anymore
Well um, I I'm not familiar. You know
I don't know every every law and every rule in every state
But if you can't do back-to-back closings in a particular state what I would definitely recommend doing if you can
Would be to just simply assign the deal and so
assigning the deal is actually if you can do it the better of the two because you don't need to use any sort of
Transactional funding and you don't pay closing costs
So the only negative to assigning a deal is that
In some cases if the other investor finds out what you're paying. Let's say that you have a property under contract for
$200,000 and then you're assigning it to the end buyer for two hundred and fifty thousand dollars
It's possible that the end buyer may see how big of a spread you're making and may may try to cut down on that
Profit so the reason why you want to double close is effectively because you don't want the end buyer to know what you're paying
but if you're able to assign in a contract that is the better way to go for sure and
You can take that fee directly and you don't have to pay any closing costs and so the last way
So we talked about so far three ways to make money in real estate the first is
Buying and holding rental real estate. Which is the best long-term?
Wealth strategy the second thing that we talked about was
Fixing and flipping properties and again if you fix them flip properties you want to make sure that you're doing it
Taking a little risk as possible
the third way that we talked about
Investing in real estate and making money in real estate is wholesaling deals
Which is just simply meaning that you're not taking title to the property and you are selling it to an end user
Who is then going to either fix and flip the property or find hold the property and the fourth way?
Again, I mentioned in the beginning that I never thought I would
Become a fixin flipper. I never thought I would flip properties and
The last way that we make money is by listing properties
and if I thought that I was never going to be a fix and flip investor the last thing even
More so than being a fictive flipper. It would be a real estate agent and so over the course of 18 months we have
determined that
building a real estate brokerage goes hand in hand so much with real estate investing that we have put a ton of
our own time
Energy and
Financial backing into our brokerage that has allowed us to go from zero agents to 150 agents
Let me talk about some of the huge benefits of building out a real estate brokerage if you're a real estate
Investor for those of you by the way who are on the line and your real estate agent
Type into the comment section just let me know that you're a licensed agent and let me know what state you're in again
Just so I know who I'm talking to and what audience
I should be hearing this towards
But the great there's a couple of huge benefits of being a real estate agent and an investor the first is
That you're able to capitalize on all of the opportunities that you have when you need a seller face to face
so all of this all of this making money in real estate
the fixing and flipping the wholesaling the buying and holding and the listing all
revolve around you being able to get face to face in front of motivated sellers and
So right now. We spend a ton of money
We spend a ton of time every single month marketing directly to motivated sellers to get in their living room face to face
The reality is is that as a real estate investor?
I would love to buy every single one of these properties, but that's just not the case
for 80 to 90 percent of motivated sellers
They are not going to want to sell their property to an investor
They're going to want retail value, and it's really about determining
What is in the best interest of the seller so anytime that we go out to a property we are?
Analyzing and help making that seller
Understand what are the pros and cons of selling to an investor versus? What are the pros and cons of selling on a
Traditional way and so again the last element of making money in real estate is building that real estate brokerage
And what building that real estate brokerage allows us to do is
On the 80 to 90 percent of sellers who don't want to take an investor offer?
We are able to capitalize and monetize those weeds
So we're able to as long as we're doing a great job building rapport as long as we're doing a great job
Helping them to make the best decision for themselves
For the sellers that we meet we're either able to buy the property directly to either fix and flip
Buy and hold or wholesale or if they decide that they want to go a more traditional route?
We're able to help guide them on listing a home and so those are the four components and again everything
Revolves around getting face to face with motivated sellers David your license agent in Florida cool all right so um
So yeah anything else any other questions
I'll field any other questions on making money in real estate, but we use those four pillars the fixing of flipping the host
Buying and holding and listing and to kind of wrap up on the brokerage side of it
There are so many different components outside of just listing the property
That are so helpful so as we've grown as we've helped building a team
One of the benefits of having that real estate brokerage is
we are able to help our agents prospect for the exact type of
Sellers that we want to buy properties from so traditionally agents will prospect directly to sellers in
order to get listings
But when they come to our company the major benefit that they have is that any?
Face-to-face appointment that they get not only are they able to give a listing presentation?
But they're also able able to give a cash no contingencies offer
so what that allows our agents to do it allows our agents to get in the door with more sellers because
If a seller here is let me come out to your house and let me give you a listing presentation versus
Let me give you a cash offer. Nope. No contingencies close whenever you want no inspection
they are more likely to let you in the door if you prospect directly with a cash offer and
So for me building the brokerage and having a real estate agent on my team is a mutually beneficial relationship
because it helps the agents having that cash offer helps my agent get in the door and
Then it also allows need to buy more properties
David I want to stop the rat race of being a realtor and get into the investment route
We have 10,000 agents fighting for the same business well
First that's a lower one let me learn it. Let me give you my opinion on that, so
You get 10,000 agents. So you get tons of agents you've also got tons of investors
So the reality is is that whether you're an agent or your investor or your bolt?
You're going to have a lot of competition, right?
so there are tons of investors can being for properties in there's ton of agents competing for properties and
Agents and Investors ultimately are competing for the same attention of same people
We're all looking to get face to face in front of sellers who want to sell?
But the biggest thing so for a real estate agent to me is
Your time on your return on your time, okay?
so I just actually walked through somebody who is out of the Arizona market today and
He just completed his first victim flip and he made
$40,000 which
Quite honestly in Arizona is probably a little bit below the median and so what I asked him was how much do you make on?
A listing agreement and so he had mentioned to me that his average listing agreement
commission that
he makes is $10,000 and then I asked him the third question which was
Which one of them took you more time? Did it take you more time to buy and fix and flip a property and make?
$40,000 or did it take more time to actually just list the property and
what he said was
Effectively. He was you know kind of thinking about it. I'm weighing it, but I think end of the day
He said Roughly speaking they took the same amount of time
Because when he lists the property he has to do the open houses he has to go through the inspection the appraisal get the smokes
Make sure he's working with the buyers to get make sure they're getting their loan approved ETc Etc
And then he walked through the fixing and flipping. What was required on his time there, and so what we determined was
For the same amount of hours on the fixing and flipping side he made
$40,000 and on the listing side he made
$10,000 so effectively speaking as an investor. He made four times the amount of money on his time
By being an investor instead of being a real estate agent and so um
David how do you make an offer with no inspection period All right so um
Let me just wrap up that last comment, and then I'll get to that question so the last comment
at the end of the day
It's just a better return on your time and so the agent that I was talking to out of Arizona what I said to him
Was look you don't have to be a full-time investor
But what if we could help you do four or five deals a year so what if we could help you do four or five?
$40,000 and I and I think the average Margin in Arizona should actually be bigger than
40,000 but what if we can help you do five investment deals in Arizona that'll net you
$200,000 per year and to do 515 flips in a year that is not a huge time requirement
it's an opportunity thing so what we're going to put together for him is a plan of action for him to prospect to
Motivated sellers and the ones that are fixing for deals with sellers who want 15 flip?
offers your 15 flip and then the rest you're going to list
How do I make an offer with no inspection period So?
What are we needing?
What do we need an inspection period for so what we put any way any normal buyer?
Uses an inspection period So that in a worst-case scenario they can get their earnest money deposit back
Right that's really all the only reason why we need to putting inspection in any sort of document
So typically speaking a buyer will put in a home inspection
Contingency, and they'll put in a mortgage contingency
Because say that they put up a 5% earnest money deposit at a purchase and sale or adding offer depending upon
what state you're in and let's assume that that was a
$500,000 property so if they put up five 5% of
$500,000 they have
$25,000 on the line and the reason why we put it we put the inspection
Contingency in there and the reason why we put the mortgage contingency in there is
Because if we fail to get our mortgage we want to get our
$25,000 back so the reason why I'm able to put no inspection no mortgage no
No
No home inspection. No mortgage inspection is because when I meet face to face with a motivated seller
I'm giving them a very low earnest money deposit
I'm typically putting up anywhere from a hundred to five hundred dollars
And so for me the inspection is kind meaningless because I can walk through a property and get just a just a good
Of an idea of what the property might need as a home inspector, right so I don't need it anyways
But even if I did need it
I'm only going to give the seller somewhere between a hundred and five hundred
Dollars and so when you put up a hundred to five hundred dollars and you get the seller to sign that contract
You are getting the right, but not the obligation to sell that property right?
So that's all you want and in a worst case scenario if you have no contingencies you would lose your deposit
But we're talking about deals where you can make big money on
So if you're talking about the deal where you could potentially make forty fifty sixty
Thousand dollars you're really not that concerned at the end of the day
whether or not you use a hundred or two hundred or three hundred dollars in
Addition we're doing our research all up front
So we're running the comps and we're doing as much due diligence before we even get inside the property to make sure that the offer
That we make is valid so we don't go out there. We don't throw deposits out there
Just you know saying you know we never know whether or not we'll buy something when we give a deposit
And we tell a seller that we're going to buy their house
We want to be able to honor that we don't want to be able to back out
But in a worst-case scenario if we do have to back out we have that small amount of money on the line
And so for those of you who are still on the call? Do me a favor please like and share
For whatever reason Facebook gives me a lot of credit for anytime you like it
It actually will broadcast out to more people so as I'm trying to grow my network any lights any shares that you can give
Would be greatly appreciated
Jc. I'm I'm selling a two-family six bedroom east six fifty done deal um
I'm sorry. I'm not understanding
I'm not understanding that effect a question do me a favor and just rephrase that just so that I know exactly what you're referring to
Hector thank you for all the lights
Again, whatever questions. Anyone else as I've got at least another 10 minutes if you guys have anything else that you want to hit on
Doesn't have to be related to the subject whatsoever. It doesn't have to be related to
Specifically anything that I talked about anything real estate investing related in general
Just type of question don't make it. Easy on me um you know as
Much fun as I have just sitting here in my office talking into a camera by myself
It's a lot easier for me if you guys do have specific questions um
Last thing I want to hit on if anyone
Doesn't have any more questions is the fix and flip summit that we're going to be hosting on july
19th 20th and 21st at our office in Boston
We have literally about two seats left
So if anyone wants to fly out to our office in Boston and check out the exact systems that we have
We're going to be doing a three-day event where we're going to be walking people through everything that we do
We're literally going to be showing you all of the ways that we market to generate motivated sellers
We're going to be showing you the staff that we have we're going to be opening up to Q&A giving you office tours
We're going to be taking you on site to see some of our fix and flip properties
so
For those of you who are interested in potentially coming out?
Just type into the comment section and let me know or shoot me an email directly and I can
Shoot you some additional information on how to register for the event it is completely free so just to let you know
Aj your thoughts on the Dover, Mass market
Dover, Mass
high-end market tough to get deals
would not be one I would personally focus on because of the fact that it's really really extremely tough to get deals, so
I've never done a deal in dover and in fact
I very rarely even get a lead in dover so in general doesn't matter what part of the country you're in in
General the the Higher end the market is the tougher it is to get a motivated seller lead
Right so when you're talking about high net worth individuals and high net worth areas
They're going to be less success acceptable to a job loss or a market
Market downturn they're going to have more equity in their property so in
Terms of like I'm assuming you're talking about investment if you're talking about living in dover
Obviously, it's a great town. I don't know too much about it in terms of living there
but I do know that it would be one I would stay far far away from if you're trying to invest in real estate because
It's going to be tough for you to get deals
The other thing about our investment strategy that I implement with all of the people that we're working with across the country is I
Really like to invest in markets where in a worst-case scenario you could rent out the property and still cashflow
So for those of you who are on the line that are in the Boston market?
We like to be in in markets where we can pay
150 or 200 or 250 thousand
Renovate the property and then sell it for you know three 350 400 because in a worst-case scenario
Let's just say that
we're all in on a deal for two hundred and fifty thousand if we can still rent that property out for
$2,000 a month in a worst-case scenario if the market did turn
We could hold that as a rental and that is a huge part of our buying
Strategy locally and I would recommend the same for people that are in different markets across the u.s.
Constantina what northshore accounting ethics. Do you think are the best?
You guys offer the financing are just a process um so we don't offer the financing typically
We find our Boston deals first
So it is it is sometimes the case where we will have excess capital and we will lend it out
So it really depends on a case-by-case basis, but typically speaking we're not looking to be lenders
We are lenders in some cases when we have excess capital and say that we get slow on our particular projects
the North Shore Towns in Essex County
s okay, so
essence all right
I would say linn is definitely the top one for sure linn is the easiest one to get deals in
hands down in Essex County
I'm trying to think of one what other towns are in Essex County
I know swampScott and no Marblehead those ones are not good at all
a Pd
Is is decent Peabody can be good Pbs gotten a little bit harder to buy in over the last couple of years
but the one I was focused on for sure is when
They've got tons of properties that you can still cash flow on a multi-family basis in
That you can fix and flip and make money in on most of the properties and limb that you're fixing and flipping
They fit my formula of in a worst case scenario you could always rent the property back out
Here bro. Yes, I forgot that hero was in essex
County if April is in essex county hey bro. Would definitely be a very very good one. We do a lot
We do a lot of deals in Haverhill both on the multifamily side and on a single family side
And it's definitely a good one ajay Saugus
Saugus is trying to hit in this um we've done some transactions there. It's gotten competitive recently um
Really all that you're looking for you could you know in any County across the u.s.?
What you're looking for is you're looking for that lower end section an extra section where there's going to be the most
Problems right and so as a real estate investor
You're looking for to solve some of these problems
so if
you're the higher end that you're looking at going and Saga starts to get up there a little bit it starts to get a
Little bit more difficult to buy in but the reason why saugus is still pretty decent?
Overall locally is because of the fact that saga still has some pretty old houses
So the average house in saugus is was built anywhere from 1880 to about 1920
So it does have some older houses that do need some work
so
But um if you guys have anything else just type like I said typing any more questions
I don't see too much more coming in but we do go live every day my goal is not
we it's only me but
We don't I go live every day at 4 p.m.. These you're kind of my office hours for anybody that's interested. You can
You can check it out on the either the Ocean city. We go live in two places on Facebook
We've a live on the Ocean city development page, and we also go live on our Facebook group
and you can check out our Facebook group at
Wws cheon's for Tom calm. I'm going to type that into the url
so if you guys um
Ever want to hop on that Facebook group that Facebook group the other benefit of being on the Facebook group. Is that any?
Questions that you ask in the Facebook group
I will answer so if you jump off this call
and you forgot to ask something anything in that Facebook group will get responded to within a 24 hour period
So if you just go to question for Tom comm you can sign up
Jeff do you ever hire a local broker to list your final product instead of listing it yourself for example?
I'm a Brooklyn tewksbury and just purchased a property in somerville as steep discount
I have a good idea of a RV, but I'm not accurate as a local broker
So if a local real estate agent brings me a deal
So let's just say for example that you brought me that deal in somerville
We would let you list it back um
I do but that's just to kind of reward the person that brought us a deal. I do not feel that somebody in that
local market
Could sell the property better than me um
I feel very comfortable with all of the market valuations in any of the markets that we buy properties in I
Don't have any issues with pricing them, and I believe strongly that um
the selling a property in today's market is based on pricing right pricing and
the Mls zillow all that kind of stuff really sells the property so I
Don't feel like there's there's additional value there like I wouldn't go out of my way to hire somebody else
But if somebody brought me a deal
Then I would definitely give it back to them as a you know kind of I thank you first for bringing us something
alright, so um
Let me know what else you guys down
I get a couple more minutes here if anyone you know wants to hit on anything again for those of you who are coming out?
Flying out to Boston for the fix and flip event looking forward to meeting a lot of you in person
And I've got people on the line that are already in my coaching program, so a lot of you I've seen on Facebook
I've talked to you on the phone, but it's going to be nice getting a
Definitely a face to a name for sure so if it's not anything else. We will be live again tomorrow at 4:00 p.m.
tomorrow when we're going to be doing is actually doing a one on one strategy session with a
person who's on my email list that I've never spoken to I've never met personally I've never even spoken to them on the phone and
What we're going to be doing is I'm going to be talking to them about their real estate goals
What their real estate investing goals are and I'm going to come up
We're going to come up together
With a plan of action on how to take them from where they are today to where they want to be all right?
So checking tomorrow at four o'clock, and if there's anything else in between now and for just go to
Wwe for time calm, and you can ask me anything there, so thank you everyone for being on
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