Epic Real Estate Investing - How to Determine if a Deal is a Good Deal | 698

Episode Date: June 29, 2019

In today’s episode, Matt analyzes Forbe’s 8 Ways to Determine if a Property is a Good Real Estate Deal. Furthermore, he explains why this topic is very subjective and how to cope with it. Learn more about your ad choices. Visit megaphone.fm/adchoices

So what I like best about Abick Intensive is that you guys give a lot of information. You give a system for everybody to follow. I absolutely live the accountability sheets and how you can really account yourself every single day to create great results and actually achieve great outcomes. If you try to keep yourself very consistent and follow what Matt teach every day. What I would take the most out of this Abik training is, actually steal the system. You guys not just really do it once, but you also keep working on it and you keep refining

that system. And now that you're adding to it by creating a lot of tools, I can see like the school that you created and how you go and you refine every aspect of the system to make not just an average investor, but to make a great investor out of everybody. Hey, rock star, Matt here. And I probably don't have to tell you this because you do listen to. this show, but just in case you do know that lead generation is the engine that runs a real estate investing business, right? I mean, if you don't have consistent leads, you won't have

consistent opportunities. And without that, your bank account is going to go up and down, up and down, just like a roller coaster. But if you know the best sources for leads and how to automate the flow of them, your income, it can be nice and steady to a point where you can then focus more on causing your income to grow rather than, you know, losing sleep over those money, peaks, and valleys. Let me show you how to avoid this feast or famine income flow in your business to make sure that your stress level stay nicely in check. There are three things you have to do so your business doesn't turn on you and drain your

bank account dry. You're going to want to take a look at epicintensive.com and register to join me in person for the next Epic Intensive in Manhattan Beach, California. It's the nicest beach city on the west coast, by the way. and that's on July 18th through the 20th. This is going to be the last lead machine workshop before we change it up for 2020, and seating is limited. So if you don't get in on this one, that'll be all she wrote.

We'll be on to the next thing next year, and right now for a limited time, you can only get access at epicintensive.com. Right now you can get two tickets for just a very small, fully refundable seat deposit. At the intensive, you're going to learn the essentials of a really good automated lead machine. We're actually going to work together on creating your very own that you'll be able to bring back to your market and put it to work. In fact, we're going to turn your weak lead generation into the strongest part of your business. Imagine what's possible when this is true for you.

But remember, access to the epic intensive is only available for a limited time when the seats are gone. They are gone. That's July 18th through the 20th. And it's California. It's the beach. It's the middle of summer. Bring the family. Make a vacation out of it. But don't delay. Go to epicintensive.com and register today. So if you've ever looked at a property for sale and got stopped from following through because, you know, you weren't sure if it was a good deal or not, what we're going to talk about right now is just for you. All righty. So after you watch this, that uncertainty will never get in your way again.

This is Terrio Media. All righty. I am Matt Terrell, CEO of Epic Real Estate, by the way. And if you're having trouble determining which deals are the good ones, I'm about to clear all of that up for you. And if this is your first time here at the Epic Real Estate Investing Show, I invite you to subscribe. We're here seven days a week talking real estate. And if you like what you hear, go ahead and feel free to tell a friend.

Alrighty, so when looking for deals, you're going to come across all kinds. and probably one of the more common questions, because we've got a lot of them here, but I would say this really comes typically in the form of email. Matt, can you look at this for me? Can you tell me what you think? Should I do it or shouldn't I?

Is this a good deal or not? That's what, it comes through a lot, and people will go out and they'll seek all the opinions from their associates and their friends and their coaches and their professional, other professionals in the industry. And the answers you'll get, are going to vary greatly. And that's no surprise because those answers are going to very greatly due to

you're getting someone else's opinion of what's a good deal to them. So I did a quick Google search before I recorded this just to see what answers were out there. And I have my own answer. I just want to see what everyone else was saying if I did a Google search. And as I expected, I found a ton of different answers. And the one that appeared at the top of the results is from, let's see, It's what most would probably consider a very credible source. I had to choose one.

So I chose this one from Forbes.com. And they've got eight ways to determine if a property is a good real estate deal. So let's go ahead and check these out and kind of look at these and listen to them as I'm going through these. And let me know which one you think is the most important one. Just type it there in the chat box, see if our chats work. Sure is. Daniel, good to see you, buddy. Chris, good to see you.

All righty, so let's see what the Forbes has to say. I could have chosen any number of websites, but I just chose this one. It was at the top, and I recognize the name. So number one, check for zoning issues and liens. Generally speaking, one way to tell is when a property has a characteristic or complication that leads to an automatic no for the majority of investors. Zoning issues and liens on non-excision issues and liens on smaller non-institutional-grade property are a sweet spot. These properties are too expensive.

for retail, do-it-yourselfers, but not enough meat for institutions. So there's one. So, again, listen to these and type in the one that you think is going to be the most important one. Put that in the comments. Second one is follow the 1% rule. So this is a good one. You hear this a lot. The 1% rule, meaning it states that the income property should rent for at least 1% of the purchase price to yield positive cash flow.

All right? So there's the 1% rule. Number three, let go of the HGT. hype. Let's see. What's the hype say? I don't mean watch the show too much or that channel. In order to score a great deal on a property,

buyers need to forget the HDTV hype and let go of lofty expectations. Buy the worst place on the block and slowly renovate as your budget allows. For Micah and old appliances won't kill you. And there's a lot to be said for the value of location over the perceived value of something as easily replaceable as countertops. Okay. I like that one. That's a good one.

Check the cap rate. So you want to know what it's going to what type of, what type of ROI you're going to get on there. There's a good one. Falls in line somewhat with the 1% rule. Look at the roof line. That's a different one. I wasn't expecting that.

This is a trick taught to me by a well-known home inspector, author of the Confident House Hunter. Let's see, Dylan has done structural inspections on about 5,000 homes. It's the first thing he looks at. It can tell you if the house looks sturdy, complicated, simple, elegant, vulnerable, or weak? Is it original or has it been added to? Will it drain properly?

Roof lines reveal. All righty. So there's a home inspector's trick of the trade. Six, you get a sense of condition and presentation. So the condition of the property along with how it has been presented will usually dictate if the property can be purchased at a discount. So if the property doesn't have online photos, then it likely has to zero curb appeal. It also means that a significant discount can be requested on the purchase price that the listing agent doesn't have much to work with and could just be after a quick sale. Okay. There's another idea.

Number seven, assess purchase price versus county appraisal price. I like that one, meaning let's see what the houses have sold for, not just what the county thinks the value is. And then eight, determinative price is less than 100 times monthly rent. All right. So out of all of those, we've got, let's see, check for zoning issues and liens, follow the 1% rule, let's go of the HETV hype, check the cap rate, look at the roof line, get a sense of condition and presentation, assess purchase price versus county appraisal value and determinative price is less than 100 times monthly rent. So real quick, of these eight, share with me in the comments below which one you think is the most

important one. Which one resonated with you the most? Now, I'm not saying any of this is bad advice. These are all good things. I'm going to actually learn a couple of things there myself, but it's still all very subjective, right? You know, what's a good deal to me might not be a good deal for you and vice versa. So what do you do?

How do you tell if it's a good deal or not for you? Well, I'll tell you a short story about it in just a second after you, after you share with me below what you think is the most important of those eight things. So go ahead and do that real quick. And while you do that, if you're really serious about your real estate investing, specifically when it comes to finding good deals, you might want to see what it is that we do for our clients to help them find as many good deals as they want. I've got everything laid out for you at R-EI-A-S dot com. Take a look.

And if you like what you see, let's hop on the phone, all right? So let's see what we've got. What do you think is the most important one? Let me see what the county versus sales. Good. I like it. We got one participant. We got a bunch of eyes.

So I guess you're just all catching up. I don't know how it is like on the receiving side of these Facebook lives. Because I'm live. I'm here present. But then I noticed like hours later, people are still typing in the comments as they think I'm still live. I was like, I've been gone for hours. Anyway, but within the last 24 hours, I've had two of my private RIA ACE clients that have reached out to me with almost identical scenarios. I first one reached out telling me that they had a seller willing to carry back and was asking for help and how they were going to make money from it.

And then the second one reached out to me with somewhat the same thing, but how to find private money for the down payment for a property where a seller was going to be carrying back for them. and my answer was essentially the same to the first client. My question was, well, how much do you want to make? Right? Let's figure out just because the seller is willing to carry back financing. Let's not look at this backwards of how we're going to make money from it. Well, how much money is it that you want to make? It's going to meet your standards first, right?

And the second was, he had asked me how to find private money for the down payment. And I was like, well, how much are you going to make from this? So you know how much you can pay for the down payment. pay for the private money. You see, what you do to determine whether or not you have a good deal or not,

the best way to do that is to determine what's a good deal for you up front and understanding what a good deal looks like to you up front before you start. Okay?

So you have to set your minimum deal standards for holds and flips. Okay, so you really have two basic scenarios. You got the flip, right? So you can do two types of flip. Let's focus on doing flip,

whether that's pre-fix or pre-own. In other words, this is a wholesale, right? So when you come across your deals, how much are you willing to accept if you're going to go ahead

and do all of that work? So there's a basic formula, and you'll see it in a few different ways. I'll give you two different variations of it. You've got fair market value minus repairs, right, minus your profit,

is going to equal your offer. Okay. So the big question is, how much do you want for your profit in this scenario? Okay? The other way you might see it is, and when you're looking at profit and you're going to wholesale it, you have to count your profit and the person that you're going to be selling it to as well. So you kind of have to put your profit and the other person's profit. And I think typically a good rule of thumb is to be two to one. So if you want to make five grand, you've got to at least leave 10 grand in it for the person you're going to be flipping it to potentially even more. The other way to look at it, what you'll see frequently is you got fair market value times a certain percentage for your marketplace. So you might see 70, 75, 80%, depending on the home values in your area, minus repairs, minus profit.

And this would be just yours. That equals your offer, right? So you got to know this number here first. So if you're going to hold, so there's a different way. How much are you going to hold? Are you going to look for a certain dollar amount per month? or are you going to look for a certain ROI per year? You can kind of look at it both ways.

So I'm not going to hold this property unless it makes me at least $250 a month might be one way you look at it. Or I'm not going to hold this property unless I get at least a 15% cash on cash return. But you've got to know that before you're going in. That way, when you're looking at a deal, you'll know whether it's going to be a good fit for you or not. because when you're going in, you want to be a shopper. You don't want to be a buyer.

It's just kind of like when you're going to, if you're going to go out and go shopping for somebody for a birthday present, you have an idea of what it is that you want to get them, and you have an idea of what it's going to cost. And when you go from store to store looking for just that item for the dollar amount you're looking for, you know, it's really easy when you find it. And if it's too expensive, you know, nope,

I'm not going to buy it here because I can get it cheaper somewhere else. And so you know when to say no and you know when to say yes, you can make those decisions really, really quickly. And the best investors are shoppers of deals. Just because someone is willing to sell you their property and even if they're willing to carry back and make it super easy for you to buy it doesn't mean you should buy the property. All right? So the first scenario was, how do I make money from this? And I was like, I don't know. Can you make money from it?

What are your minimum deal standards? If you flip it, how much do you need? If you're going to hold it, how much do you need? And if you don't have that answer, it's really tough to start figuring that out. You're kind of figuring it out backwards if you do it the other way. Just because someone's willing to sell it to you doesn't mean you're supposed to buy it. And that can be a really bad situation for you. And I see people get in that situation frequently, particularly if it's been a while since they've gotten a deal or they're still looking to get their first deal,

they can get seduced into the ease of that conversation and really just wanted to do a deal for the sake of doing a deal. Don't do that. It can be bad news. The second thing is, the second scenario was someone wanted to ask, or was asking, how do we find private money for it? And my approach to that is, well, how much is it going to make me? That way I know how much I can afford to pay the private money person. And the monies, here's the scenario, was it made enough money for him to support a private money person.

darn fly. It made enough money for him to pay somebody for private money, even if they had to pay a lot for the private money. He probably could have paid hard money rates and still had a very good cash flowing property for him. But here was the deal. He was purchasing it almost two times the value of what the property was. It was going to be a special property that had a significantly higher income than a

traditional rent. So to him, it was worth paying more. But now that's going to be an issue. if you're looking for private money because the equity isn't there, right? It's got to make sense for everybody, whether it's just you or it's going to be the people that are going to be involved in the property with you. All right. So if you'd like to go deeper on this, you might like to take a look at what we do for our

clients over at REIA's.com. If that sounds interesting, head over there. And let's hop on the phone if you like what you see. Now, here's what we know. The difference between a good deal and just a deal and or no deal really is going to depend on what you are looking for. And for the best way to know that is to know up front before you even look at the deal. So take a moment and figure that out for yourself. In fact, if you want to post that for me below, I'd love to see what's your minimum ROI if you're

to hold a property? What's the minimum profit you accept if you're going to flip it? And there's no right or wrong answers. That's what's great about being an entrepreneur and a real estate entrepreneur. You get to choose what you're willing to work for. Right? So there's no right wrong answers. And if you know someone that might find what we talked about here today useful or valuable, feel free to share it with them. All righty. So thank you so much for listening. You got any questions. I'll check it out. I see a bunch of eyeballs there. So good to see you all. Thanks for tuning in. This is the first time I really tried to manage the comments and the content. So it's tough to talk to you and look at what you're writing over here and what you're typing and also stay on track.

So this is a new skill for me. It's not quite, I wouldn't call it a skill yet, but I'm going to practice it and I'm going to develop it as one. Okay? So thanks for listening. God bless to your success. I'm Matt Terrio, living the dream. This podcast is a part of the C-suite radio network.

For more top business podcasts, visit c-sweetradio.com.