Epic Real Estate Investing - How to Make FAST REI Decisions that Stick! | 245

Episode Date: January 16, 2017

The speed of money is critical in the game of real estate investing. Those that are able to establish minimum deal standards and make quick decisions on potential deals are the investors that succeed. Learn how you can calculate your ROI and seize real estate investment opportunities before your competition. Line up the variables that will make the math work for you and watch your portfolio grow.   ______   The free course is new and improved!  To access to the two fastest and easiest strategies to a paycheck in real estate, go to FreeRealEstateInvestingCourse.com or text “FreeCourse” to 55678. What interests you most? • E.ducation • P.roperties • I.ncome • C.oaching Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terrio Media. Broadcasting from Terrio Studios in Glendale, California, it's time for Epic Real Estate Investing with Matt Terrio. Hello, and welcome to Epic Real Estate Investing. This is the place where I show people how to escape the rat race using real estate. And if you're just getting started and or you are looking for new and creative ways of making money in real estate, I've put together a free course just for you, including a check. list on how to find motivated sellers. These are property owners that are willing and able to sell you their property at a discount.

And to access that free course, go to free real estate investing course.com. Free real estate investing course.com. All righty, last call. Epic Intensive is just two weeks away. If you plan on attending and haven't reserved your seat, please go to Epicintensive.com. I've got stellar stuff prepared for you. Got a new Ninja Facebook strategy that we've got in place to find motivated sellers on Facebook, obviously if it's a Facebook strategy we're going to find motivated sellers on Facebook with it

and I can guarantee you nobody else is doing this and I'll be revealing it first at the intensive also I'll show you how we're exiting our deals with seller financing generating cash and cash flow and we're going to go through deal by deal and scenario by scenario lots of crowd participation is going to be a really good workshop for seller financing and doing it all without playing in that gray area of Dodd-Frank violations it's very easy to get in trouble when selling seller financing to a resident owner. You must be in compliance with the Dodd-Frank Act, with RESPA, and the Safe Act. And we're going to go over all of that and how to play that game and do it with a clear

conscience that no one's coming after you. And each and every attendee is going to leave there with their very own custom plan for exiting the rat race, regardless of where you're starting. Every attendee is going to leave there with their own custom plan to exiting the rat race, and that's going to be at the end of day two. All right? So there's a bunch more, but those are some of the high. I'm working on it right now as we speak.

Actually, not as we speak. But I'm working on it today, and I'll go right back to work on it after I've recorded this episode. The no agent-needed book project I've mentioned the last couple weeks. It's essentially filled up. There are a few markets left. Surprisingly, Los Angeles is still available in even Orange County. So Los Angeles and Orange County and the Bay Area, San Francisco. So California is very much gone unrepresentative.

San Diego is spoken for. But boy, some of the best markets in the country are available. Phoenix, Arizona kind of started out really slow like this. And it started out slow in interest and then eventually built up to be this huge dog fight. But anyway, West Coast, California is available. I'd love to get some representation in the book. Northern Florida is wide open. So the Orlando area, the Tampa, what's over there?

I think Jacksonville is over there on the East Coast of Florida. That's all available. And Chicago is still open. So major metropolitan are open. A lot of these small little minor markets have. been spoken for, but a lot of these major markets, those three that I think of, Florida and California and Chicago, let's go for it. If you're doing at least two to three deals per month, this is your time. And if you're doing two to three deals per month and you'd like to increase

name recognition of your business and name recognition of your brand, you'd like to elevate your credibility with sellers, and you'd like to receive organic, motivated seller leads indefinitely, I mean, forever, go to noagentneededbook.com for the details. Noagentneededbook.com. Go there for the details and this will be the last announcement of this. This train is about to leave the station. So if you've been thinking about it, you've been kind of putting it off or you've been meaning to, go to no agent needed book.com.

Inside the Epic Pro Academy private Facebook group, lots of big wins lately. Really nice. A lot of people gotten off to a stellar start here in the new year. Jeremiah Johnson, for one, he's got his last week he closed his first wholesale deal of the year, made 15 grand. He's got two new flips under contract.

projected 75,000 in profit, and he's got a just purchased a new list with 38,000 records. Fantastic. It's on, he says, eight new seller appointments this week, closing on a flip today, and one and two contracts pending signing. Fantastic, Jeremiah, you are playing all out and you are going gangbusters. Josh Swanson got a text last night from a lead that he met in October, who turned out to be not quite ready to sell then. met with her today, got the deal under contract at a great price. So glad I left the offer in writing, he says. Yes, always leave the offer in writing.

That's why he got the deal. Something that happened in October wasn't quite the right time, but here we are in January. Boom, got a deal because he left the offer in writing. He closed on a condo. Eight business days after getting the contract signed. All paperwork completed, HOA estoppel. Everything was done. The big win here was finding his title company that can make something like that happen in Florida.

So congratulations, Josh. crushing it, dude. Alex Jacobs, first deal of the year under contract, projected profit between 50 and 60,000 bucks. And now he's negotiating his second deal. Fantastic. Alex, Paul Thompson closed the deal that he plans to owner finance. Also got a deal under contract this weekend,

and he used a slide broadcast for a follow-up campaign, got a verbal commitment and meeting set up for next week to sign the contract. You got to follow-up, follow-up, follow-up. The fortune is in the follow-up. So nice work, Paul. Next round of marketing for him is in the mail and found a new farm to start prospecting. all major great wins.

Moral of the story to everyone who is new is to keep plugging away, keep planting those seeds and water, water, water. Fantastic, follow-up, follow-up. And then Josh, Josh Smith, met two sellers negotiating price, two buy and hold under contract, and two more appointments for next week. Congrats, Josh. And Josiah Wilson finished up on his first fix and flip this week.

Fantastic, time to do the paperwork for his first subject to transaction next. Super. So great wins inside of the private Facebook group of the Epic. Pro Academy. And a subject that's been coming up with my students lately is should I or shouldn't I. You know, they've got a deal that they're looking at and they're like, I don't know if I should or I shouldn't. They post it inside of the Facebook group. What do you guys think? And, you know, all of that is good. I mean, to ask questions of people that are doing what you're doing to get some objective eye, some third party opinion on stuff. always good but I really want you to be able to make this decision on your own because it's your money it's your time at stake I want you to make this decision on your own and be confident about that decision and I want you to be able to make these decisions fast and so the question of should I or shouldn't I do this particular deal any deal I think the answer to that question is it's going to be unique for everybody and I think the answer for each individual revolves around ROI return on investment and that's a question.

kind comes in two forms. Return on your dollars invested and return on your time invested. Both very valuable tools and resources that you have and you've got to determine and you've got to make good decisions on how you use both of those, the dollars that you've got and the time that you've got. And each and every one of you should establish minimum deal standards for yourself. Like what is the minimum amount of profit you're willing to take to invest your money in something and how much do you need back in return or how to get out of bed? So, you know for when you have these places you want your minimum deal standards in place because when you have these in place it makes it really easy to make decisions about whether you should or shouldn't it makes it easy for you to make those decisions for yourself about whether you should or shouldn't

and your standards they come basically in two parts there's two kind of different types of standards you should have first a flip standard second a hold standard so you've got you got your standard for stuff that you're not going to hold and you have standards for stuff that you are going to to hold. Now the flip standard, stuff that you're not going to hold. What's the minimum amount of money you're willing to make on a deal? You have to answer that question for yourself. What's the minimum amount of money you're willing to make on a deal? What's the least amount of money you're willing to get out of bed for? And there's a general answer for this. And then there's an answer that would involve some variables as well. But just as a monetary value, just that number, what's that minimum number you're willing to get out of bed for? So a flip with no fix, like a wholesale, you're not going to fix it up. You're just going to flip it really quick. Typically has an infinite ROI, right?

I mean, unless you have to close on it first and you got to put some of your own money in it. But typically, on those quick flips and wholesales, you don't have to put any money in there. You don't have any money at stake, so that's an infinite return. You know, to figure the ROI on this, you take the money, you profit, you get back from your deal, and you divide it by the money that you put in. That's how you, that's the ROI equation. You take the money or the profit, you get back from your deal, you take the profit, divide it by the money you put in. So if you have a deal under contract and you assign it to another person and you make $5,000, so you make $5,000 on assigning a contract, you take $5,000 and divide it by the money you put in. So how much money did you put in

that deal? Yeah, you didn't put anything. So that gives you an infinite return, that infinite return that can't be calculated, right? Because you put no money into this deal. But you did put in your time. So you can't leave that out of the equation. So that's what you do get to calculate. Was it worth your time getting out of bed to make $5,000? If so, good deal. You should do it, right? If you should or shouldn't, if it's worth your time,

you determine it's worth your time getting out of bed for $5,000, then cool, good deal. You should do it. If not, bad deal, don't do it. You know, if making $5,000 is not good because you know it's going to take you away from doing deals that would generate more for you, then maybe you shouldn't do it. You know?

And so that's your time. Also, another way to look at this is like the effort. You know, what's your ROI on effort? You know, I'll do deals all day long for $1,000 if all I have to do is shuffle paperwork back and forth. I mean, that's what we do with our transactional funding. So you just have to determine the time, but that I wouldn't do a deal for $1,000 are going to take me four weeks to close.

That wouldn't be a good use of my time, right? So everybody's going to be different. So you've got to determine what your own time is worth. Now with a fix and flip that you make, say, $25,000 on. Sounds like a great deal, right? You're going to make $25,000. Who would turn that down? And so say this fix and flip, you're going to make $25,000,

and you're going to have to put in $100,000 of your own money to pull it all together. Whether that's what the whole deal takes or whether that's just the rehab or whether that's a combination of the rehab and the acquisition of the property, you get funds from or whatever from somewhere else. Whatever it is, you put $100,000 of your own money. So you take $25,000, that's the profit, and divide it by, $100,000, that's a 25% ROI. A good deal by most people's standards, right? A good deal by most people standards, a deal that most people should do. But if it took you six months to work

that deal from acquisition to close, is it actually, is that good deal now good? Is it worth your time to make $25,000 spread out over six months? And we're looking like three, four thousand bucks a month, right? Somewhere in there. Just the quick math, I don't have to calculate it in front me, but it's somewhere right in there. Yeah, like $4,000 a month. Is it worth tying up $100,000 for six months to make $4,000 a month or make that $25,000? Is there something else you could have done with that money in that time? Could you be taking that $100,000 and do two deals in that time period?

Is it likely maybe you're going to, you know, maybe you're going to miss out on even a better deal during that time because your $100,000 wasn't available to you. We call those opportunity costs. You missed out on opportunities because your $100,000 was somewhere. else working. So if not, then you should do this deal. If you don't see that happening or, yeah, if you don't see that happening, then go ahead and do this deal. If you do think that's possible, then maybe you should not do this deal. You see how you evaluate it? So you got to look at your ROI, is that acceptable, your return on your investment dollars, and then you want to look at your

ROI, your return on your time. But maybe that, maybe you had $100,000. That is a good deal for six months to make 25 grand, but you got access to plenty more dollars somewhere else, so you're not going to miss opportunities. Got it? Cool. So those are all the different variables and scenarios. It's going to be different for each and every person. That's why I'm saying the answer to this is unique, whether you should or shouldn't.

So if you have your standards in place, the decision process is really easy. There should be no major vacillating over a deal. All there is to do is to run a quick calculation of your ROI factor in how long it's going to take to experience that ROI. and ask yourself, is it worth it? Okay? Is the return on dollars good for you, depending on your situation,

and how long is it going to take for you to get that? If that's good use of your time, then boom, then you do it. If it's not, then you don't. It's really quick. You can make that decision really quick and easy if you have those standards in place right up front. Now, if I do it, the other question is, if I do it, is there anything I'm going to likely miss out on?

What happens if I don't do it? Just basic evaluating questions. Don't get caught up in the stories of sellers. Don't get caught up in the stories of properties. Don't get caught up in the fascination of what could be. Like, if everything comes together, then this is going to be great. Don't get caught up in the trap of, I've got to do a deal. Like, I haven't done a deal yet.

So I got to get the first one under my belt. Don't let that factor into your decision process. Or I haven't done a deal in a while, so I got to get one done. Don't let that factor into your decision process. I mean, you're walking on really dangerous ground when you're thinking like that. Just run the numbers, the ROI specifically, analyze the time is going to take the manifest that ROI and then bounce that off of you, the minimum deal standards that you've established, and then make your decision.

Boom. So I'm going to go to the left or I'm going to go to the right. So that's how it works with flips. How does it work with holds? Really, the same way, right? Just calculating the ROI is a little bit different, not much, but a little bit. So you're going to calculate the money you're going to get back from holding the property. Okay?

This is what we call your cash after debt service. So you got your gross rent minus operating costs. That's your net operating income. Right? You got your gross rent minus the operating costs. That's your your, your vacancy, your maintenance, your management, your taxes, your insurance, all that stuff. Those are your operating costs. So you take your gross rent minus your gross rent minus operating cost equals net operating income. Subtrack the debt service. That equals your cash after debt service. So take your annual cash after debt service, your annual cash after debt service, and divide it by the amount of money you put in the deal. and boom there's your ROI. So if your annual cash after debt service is $5,000, so on this property, after all of the operating expenses have been paid, after all of your debt has been paid, you're left with $5,000,

and you put $25,000 down on that deal to hold it as a part of your inventory, so that's $5,000 divided by $25,000, that would be a 20% ROI. 20% cash on cash return. For most investors, that's an acceptable ROI. Why, most investors should do that deal. Most investors should do that deal based on just the numbers alone. But the next level to that question is, how much is it going to take from me to get that property to perform at 20%? How much time is it going to take an effort is it going to take for me to get that property to actually perform at 20%?

Is it worth it to me? Is it worth the time? If it's at a set it and forget it type property, if it's one of those types of property because you've got a great. you've got great property management in place, that is going to be worth most people's time. But if it's going to be repair after repair, eviction after eviction, rehab after rehab, after rehab, headache, then most people shouldn't do this deal.

But I still say most people. For some people, like, when I got started, that was a good deal. I was like, okay, I'll take it. Because I knew I had to just keep on acquiring. And I knew the more deals I had, the easier it would be to manage the portfolio. So I didn't look at any one deal as just one deal. I looked at it, okay, I'm absorbing this into my portfolio,

and then I'm going to manage it and make it work that way and profit from it that way once I put the time into it. Okay. So, but most people, that might not be good. Like that type of deal wouldn't be a good deal for me right now. But when I got started, it absolutely was. Okay. Now, with all of those scenarios that I just covered,

if you noticed, I had a disclaimer in there of quote unquote, most people. And I do that because depending on your market, depending on your experience, depending on your existing investment portfolio, it depends on whether you should or shouldn't. That's why I say you should determine your own minimum deal standards. So how do you do that? Well, there are probably many different ways to answer this question. But here's a really simple way. I've got two questions for you.

First, ask yourself, what is your current money returning you right now? What is the money that you've got? what is it returning you right now? So if you've got a bunch of money in the stock market and it's giving you 8%, maybe your minimum deal standards should be at least 9%, right? At least, if you're going to put some money to work, you want to at least get it performing above and beyond what your money is already doing. Now, when you factor in your time, maybe the time isn't worth that 1% difference.

Maybe it's got to be 14%. You need 6% more to exert your time to get that return. So I want you to look at what your current. money is doing right now. If your current money isn't doing anything right now or if you don't have any or if it's very limited, then you have to decide what is worth your time, right? Second question is, what is my time currently returning me right now? So if you've got a day job that's paying you, say $100 an hour, that's what your time is currently returning you right now. Does it make sense to jump into a deal that pays you less than that $100 an hour?

Now maybe dollar meant. Here's another place where it depends. Maybe your investing is just something that you're doing on the side, right? And your intent is not to actually leave your job or leave your career anytime soon. So maybe that's not a good use of your time. But if you are planning your escape from the rat race or escape from the workforce and you want to be in control of your own time, then maybe doing that deal, sacrificing a little bit dollar for dollar time in support of the big picture, then maybe it is worth your time, what your time

is currently returning. Okay? So you just want to kind of look at what was your money doing right now. So I got to do better than that. And then you got to look at what time is currently returning right now. So can you do better? So that's kind of how you, I mean, not kind of kind of. That is how you factor return on investment.

and excuse me, how you establish your own minimum deal standards. And we went over how you factor return on investment. That is how you use it to help you determine whether you should or shouldn't do any particular deal. Because it always depends. What's a good deal to me is not a good deal to you. What's a good deal to your neighbor? Not a good deal to you. What's a good deal to you might be a exceptional deal for your neighbor or a terrible deal for your neighbor.

You got it? Everybody is in a different situation. They've got different goals. And that's how, I just want you to be able to make that decision for yourself, make it confidently, and make it quickly. This is a game of speed. Real estate really is. I mean, the early bird gets the worm. Those that act fast and confidently are the ones that win in the long run.

But it's not acting fast just for the sake of acting fast that makes you win. It's acting fast with an established decision process in place. establishing your minimum deal standards up front. This is going to allow you to move fast, move confidently, and move competently and accurately and grow. Got it? All right. So that's it for today.

I'll see you next week on another episode of Epic Real Estate Investing. God bless. And to your success, I'm Matt Terrio. Living the Dream. You've been listening to Epic Real Estate Investing, the world's foremost authority on separating the facts from the BS in Real Estate Investing Editing. If you enjoyed this show, please take a minute to visit iTunes and share your thoughts.

Thanks for listening. We'll see you next time here at Epic Real Estate Investing with Matt Terrio. This podcast is a part of the C-suite Radio Network. For more top business podcasts, visit c-sweetradio.com.