Epic Real Estate Investing - Submitting Your First Offer and How to Open Escrow | Episode 77

Episode Date: November 25, 2013

Matt is back from his travels with lots to share, as well, he answers listener questions regarding: How to submit your first Offer Landing page success Dealer status revisited How to open escrow Matt will show you how to invest in real estate at FreeRealEstateInvestingCourse.com, or he'll do it for you at CashflowSavvy.com Subscribe to this podcast at EpicRealEstateInvesting.com Learn more about your ad choices. Visit megaphone.fm/adchoices

Broadcasting from Terrio Studios in Glendale, California, it's time for Epic Real Estate Investing with Matt Terrio. Hello, welcome. Welcome to another episode of Epic Real Estate Investing. If this is your first time listening to the show, welcome. Really happy that you're here. This is the place where I show people how to get out of the rat race using real estate. And it all begins with just the small. small, simple little shift in your mindset, a shift and focus. Simply stop focusing on creating piles of cash and start focusing on creating streams of cash. What we like to call here in the real estate world, we call that cash flow. And by doing just that, by making that shift in mindset and then following that mindset up with correlate actions, I escaped the rat race in less than four years.

What literally 99% of our population is unable to do in 40 years. and I don't share that with you to brag. No, not by any means. I don't consider myself special in any way, meaning anyone can do this. If someone would only just show them how. Once someone shows you how, that's up to you. But most of us don't even have anybody to show us how.

And someone was gracious enough to let me in on this particular life secret and now I'm letting you in on it. And you can take the first step in learning how to do it yourself at free real estate investing course.com. or if you're just too busy to do it yourself, you can go to cashflow savvy.com. Cashflow savvy.com. And there you can leverage my experience. You can leverage my team's efforts, my teams that I already have in place all across the

country, and we'll do all the heavy lifting for you. You're still the boss. You still call the shots. You can be as involved or not involved as you want to be as hands on or hands off as you want to be, you own the property, we just do all the hard work for you. So over at cashflowsavvy.com, we build cash flowing portfolios. We build them for doctors and lawyers and small business owners. I mean, our client list includes just about every type of busy professional that you can

think of. Basically, people that are already having their careers. They're already living their careers. They're working every day. And they're just not interested in changing careers. They're just not interested in becoming a full-time real estate investor. but they understand that they do need real estate in their portfolio in some way, shape, or form. So if that sounds like it's your situation or someone's situation that you know,

and maybe it makes sense to go over and check it out. You can get all the information you need via our free investors package at cashflowsavvy.com. All right. It's great to be back. I feel all refreshed and revitalized. And most of you probably didn't even. I bet all of you. There may be a handful of people that knew.

But I bet most of you didn't even know I was gone as I pre-recorded the last few episodes and I put them on time release. It's one of the little tricks we have here on the internet called automation. And, you know, while you're listening to those episodes, of which, by the way, looking at the stats, those last few episodes appear to be our most popular episodes ever. So if you're new to the show and this is your first time or the only episode that you ever downloaded, you probably owe it to yourself to at least go back a few more episodes, three at least, maybe four, and make sure you download those two.

But anyway, the last couple of weeks I've been making, you know, just my one final pass for the year through my more active markets. I started in Cleveland and then moved on to St. Louis and finished up in, finished my trip in Memphis. And I had some loose ends to tie up before years, and I wanted to stop by, say hello to everybody and straighten out some crooked parts of the business. and I just wanted to put 2014 in position to be even better than this year was. And I'm happy to say this trip was a smashing success, and I can't wait for 2014.

I'm very pleased. And I do have a few people I want to acknowledge. You see, while in Memphis, I was able to meet and sit down with podcast listeners, Andy and Ed. Andy and Ed, before I left, sent us an email, and we coordinated our schedules. And get this. These guys drove 10 hours from Kansas to have beer. with Matt on world famous Beale Street in downtown Memphis. Ten hours.

Can you believe it? I mean, I can't get some of you to drive 10 minutes to your local monthly RIA meeting. Ten hours these guys drove. You know, and I don't know if I'm going to be the solution for what ails them or not. It still kind of remains to be seen, but we're talking. But it's for actions like this that I have no doubt that they're going to be successful. You see, they took initiative. they initiated the contact, and then they were resourceful.

They said, okay, he's 10 hours away. That's probably as close as he's going to be for the rest of the year. Our issue is somewhat time sensitive. Let's go ahead and make this happen. And they did. So I've got high hopes for them. And it's probably needless to say, but I was absolutely flattered beyond belief. So we spent several hours together, just talk and shop on Beale Street.

Lots of good food. They took beer with Matt to a whole other level. It was a very long night, but a blast, nonetheless. We did not record this beer with Matt's session, and it's probably a good thing that we didn't. You see, they say what happens in Memphis. It stays there. So Andy and Ed, if you're listening, thanks for making the trip.

Thanks for the conversation and stay in touch. We will do it again. Got to keep Ed, though, on his best behavior. He's a little bit dangerous. All right, we'll be in contact soon. All right. Also, got an email today from Josh Justin Yano. And you might remember him from episode 67's session, the very first episode of beer with Matt.

And Josh is just aged 23. And he's closing his very first deal and he's putting $9,000 of profit in his pocket. So congratulations, Josh. Nice, nice work. This could be the beginning of beer with Matt Karma. So Edgar Macias, I'm looking for a success story from YouTube very soon. And Andy and Ed need your stories also. All right, let's see.

Oh, the Epic Pro Academy is officially closed now to new members for the holidays. Well, I get to work on some awesome revisions and additions. It was pretty amazing. During the first two weeks of this month of November, the number of academy members doubled in size. And why that excites me is because I'll be putting in place an academy forum where members will be able to network. working exchange ideas with each other.

As well, I'll be putting in place a section where members can access each other's deals, where you can actually promote your deals to other members, and you can also access each other's buyers list. So I wanted to put that in place with the intent, at the very least, to create some finder's fees for members. You know, it can be a great lead generation source for deals for you, and it can also be a great place to leverage other people's buyers lists, and then everyone kind of makes some money in there,

and, you know, I'm trying to just create a really awesome environment that really promotes your business. And last thing, my inbox, my email inbox is jam-packed. Absolutely jammed with emails from all of you. And I appreciate all the emails. I appreciate everything. I'm just really far behind. They're just coming in way too fast. And they ain't short emails either.

I mean, some of you guys have got a lot to say. And that's totally okay. I will get to all of them, but just please be patient. Oh, and please, I can't analyze any more deals. I've said this a few episodes back, and I just can't do it unless you sign up for the email coaching portion of the Epic Pro Academy. It's just way too time-consuming. The internet is a very big place with a whole lot of people, and I'm only one person. I do want to help all of you, but there's just, there just aren't enough hours in the day for me to do that and still manage my own business.

So thank you for your understanding on that. I mean, you know, I really pride myself in responding to all of my emails, my tweets, and Facebook messages. I do all of that personally, but I physically can't take the time to analyze every deal that comes my way. There's just not enough hours in the day. So if you absolutely need my help and you can't wait for a week or two for my response, that's what the email coaching upgrading academy is for.

So Academy members, I'm not getting back to you quick enough. First, I apologize, but that email coaching option could be a very viable opportunity. option for you, and you can do that right inside of the academy. And, you know, just with the volume of emails I get, this is the only way that I can think of to prioritize people's messages. So I offer email coaching just for this specific situation. And if you have a quick question, the best way to get a quick response from me is to tweet me your question. That keeps your questions short, 140 characters or less, and it's easy for me to respond in a quick and short way. So if you're on Twitter, you can find me at Epic, R.E. Investing.

Epic R-E-investing. All right, so sorry for all the announcements. I typically like to get to the point much quicker than this, and typically I do. But after being gone for a few weeks, I had to cram all the announcements into one episode so we can get on to the good stuff. So let's get on with the show

and let's increase your intellectual currency a bit. I got a question on the Epic Real Estate hotline from new academy member, Yulee. Hey, Matt, this is Yulee calling. September 5, happy Marine Corps birthday. It is Sunday morning. And I've got a quick question. I just left you a Facebook page message as well, but I don't know how frequently you check that.

I have a quick question. I am a new member of the Epitpo Academy. And fortunately, or unfortunately, depending on how you look at it, I have the opportunity to go look at a property that is next to my house, my primary residence, that I've had my eye on for a couple of years. and the seller is moving. It's a duplex, and they are vacant units right now. They have been rented in the past quite regularly. I would say full rental for as long as I've lived here. And the seller, since I've expressed interest in the past,

the seller has often been first rights of refusal on making an offer on the property. Good part is that's great news for me. I have an opportunity to look at it next week with a contractor. that I am also prospecting as a team member of mine, so my ongoing business ventures. But as far as the property itself, I don't know if I had the confidence nor the experience

to move much farther than the actual appointment and looking through it and making an offer on it. I think they're asking a little bit too much, but, again, I've just gotten started with your program, and obviously looking forward to doing more, But my question to you is at my level of experience, do I like this on walk? Or is there any little bit of advice that you give me as far as how I should make my next steps, whether timid or aggressive? That's all I need, really.

So again, thanks, Sepify. Have great. What you do is great. I enjoy it thoroughly. All right, thanks. Okay. Yulee, first of all, Semperfy to you, Devil Dog. And second, welcome to the academy.

And third, I did not see your message. on my Facebook page until probably 10 days or so after you left it. So I'm very sorry for the delay. But for future reference, for you, Yuli and everybody else, of all the ways to get in touch with me, Facebook will probably get you the absolute slowest response. And the hotline, it's not much better in terms of the speed of my response, but you're more likely to actually get an answer from me. So Yulee is, he's concerned that he's just getting started and wondering at his level of

experience should he walk away from this deal based on, you know, the possibility of the seller wanting too much for the property. And he's asking for advice on whether his next step should be timid or aggressive. Okay. So interesting way of putting that. Thanks, Yule. And I want to congratulate you first for even entertaining a deal this early in your investing career. That's awesome. Moving at the speed of instruction, I love it. So I want you to know that you're on the right track. Okay. And no, you should not walk away just because your experience up to this point is limited. My advice to you would be the same advice I'd give to anyone of any experience level. And I show this inside of the academy, but as well, I show it inside the free course.

So if you download it the free course, anybody listening, then you get the same information as it's the foundation of you putting deals together. So step one, you've got to define your deal criteria. What type of property are you looking for? In what area are you looking for it? Okay, and you got to define, are you looking to create cash or in the way of flipping it or wholesaling it? Or are you looking to hold it and create some cash flow? And then you have to establish your minimum deal standards, your minimum return on investment.

And that can be expressed in a percentage or it could be expressed in a dollar amount. For example, I need 15% cash on cash return on my investment or I need $300 a month of cash flow. You can define it in either way. But that's up to you. you get to define your own minimum deal standards. So that's step one. You've got to define your deal criteria and your minimum deal standards. Step two, after you've determined that there is an acceptable level of motivation with the seller,

after you've done that over the phone or that initial meeting, you need to make an appointment to get all the questions answered on the seller information questionnaire. That's what's next. You've got to get all that information. You've got to get that completely filled out. You can't craft a deal until you have that information. Okay. And then step three, take the information from the questionnaire.

and conduct a really quick analysis. I show you how to do the quick and dirty math inside the free course using the Epic analyzer. And then structure that deal so that it meets your minimum deal standards. It doesn't matter what the seller wants. It doesn't matter what the market even says. It matters what are your minimum deal standards? So you want to create an offer if it were accepted,

your minimum deal standards will be accepted. And I walk you through this process in detail in both the Academy and the free course. and then step four, you present your offer. That's it. Very easy. It's, you know, it's my opinion that you always present an offer. And the type of offer that's going to move you towards your goals, that's the type of offer

that you present, and that has nothing to do with your experience level. If you follow the steps and you analyze the property with the quick and dirty math and you present that offer, then you're going to, it's going to be an offer that moves you towards your goals. And I recommend you always do that. And some are going to get it. accepted and some won't, but always present an offer. And here's what you're going to find. You know, offers that you think are no-brainers and there's a for sure deal here, sometimes

they won't get accepted. And for times when there seems to be no likelihood of an offer being accepted, for example, in this situation where you think the seller might want more, then there's times where it will actually be accepted. You just never know. For example, I just put a small temporary hold on purchasing for the rest of the year. I've just got, I've got too many deals under contract and or they're under rehab, and I've just got a little bit of, my plate's full. I've got a lot of catching up to do before I take on anything new. But an opportunity for a small package of properties came across my desk recently, a few weeks ago, something that I would typically jump all over. And instead of passing on the deal, what I did is I just put together an offer

right away. I put it one in together anyway, one that was just well below my minimum standards, or above my minimum standards. Let's just say I would put together a really aggressive offer. Not sure if that's above or below my standards, but I had a lot of space between this offer and what I was probably willing to pay for under normal circumstances. And if I were going to take on another project, what my mentality was, it had to be very worth it for me. And I really didn't I think there was a chance in hell it would get accepted. And you know what? It did.

It was accepted within 24 hours. So that's just to show you that you never know. And that happened just this month. And the point is, always submit an offer. That's the surefire way to do more deals. Submit more offers. So thanks for the question, Uli. And good job, by the way.

Next question. Hello, Matt. This is K.L. McDevitt in Jacksonville, Florida. I encountered a problem with squeeze pages. and apparently my ads are not giving people sufficient incentive to include their name and their address and their email address so that I can contact them back. They go to my squeeze page, but then they just ignore the empty blocks that ask them for basic information. So I can't get back with them. Fortunately, the software does scalp the phone number so I can call them back, but I'm not quite sure who I'm calling.

I would appreciate you elaborating on that during one of your podcasts, which I enjoy considerably. Look forward to talking with you soon. Take care. Okay, thanks, Kail. Nice to hear your voice. One of my favorite listeners, one of my oldest listeners, I think, and we've been exchanging emails for more than a year or so. So Kail's challenge is getting people to fill out all of the fields on his landing page. And there's a few things to look at.

A quick fix is to... it's a really quick fix, actually. Just make all of the fields on your landing page, make those required. Like, they have to fill those out before they could submit. And, you know, I don't know which program you're using, Kale, but everything that I know of everything I've come across has an option, even the lowest tech options. They all have an option to make the fields required to fill in or not.

So look for that function inside. of your landing page technology. And next thing to look at is, where are you driving your traffic from? Basically, what's the quality of the traffic? Are they actually potential sellers? Okay. And that might be a basic question, but it's still something to look at. The next thing is, what does your landing page say?

Is there something on there that might not be working for them? Does your message match the traffic that you're receiving? That's another biggie. You might be finding motivated sellers, but there might be something. on the landing page that that doesn't really fit their situation so they don't think it's a good fit even though it might feel like a good fit to you so you want to look at that another thing to look at i guess would be i mean especially if you've checked everything already that i just mentioned how motivated are they i mean assuming you're looking for sellers in this question if they are

filling out every field particularly the the phone number field they obviously don't want to be called back or they'd fill it out right i mean they're not that motivated they're looking for a solution. They would definitely fill in the field there. Or maybe they're not a seller at all. And what I mean by that is, and I mentioned this earlier, the internet is a very big place with lots and lots of people. There are as many different motivations out there for visiting websites as there are people.

So basically, Kail, welcome to the internet marketing business. It can be a game of cat and mouse. It can be a real study and a real education in human science. psychology to understand why people do what they do. And, and you know, the best in the business, the best in the internet marketing business, they're constantly making strides to increase conversion rates, to get people to fill out their forms. And that's essentially just the name of the game. And they test and they test and they test their traffic sources. They test their web content. They test their messages. They test their opt-in boxes. They test the colors of their opt-in boxes.

They test everything. So, Kail, don't feel too bad. Or, I, I mean, don't get discouraged. Like, you don't feel like you're doing it wrong if you're getting incomplete forms filled out on your landing page. So the quick fix to limit the amount of incompletes that you receive would be to mark each box as required fields. So do that first. And then if you have the free time, you can start testing with all these things that I mentioned. But keep in mind that your landing pages, your internet presence, it's just another tool in your lead generation. Although it's automated and it doesn't require a whole whole.

lot of attention from you while you set it after you set it up, it's still a numbers game. You know, using the internet in conjunction with all of your other lead generation strategies can be very, very powerful, but used all by itself can be rather expensive and frustrating. But mark all of your fields as required entries and keep doing what you're doing and see how that works. Okay. So thanks, Kail. Next question.

Hey, Matt. What I wanted to know about is how many deals would you do a month before they would consider you a dealer? And then would you have to protect yourself under the LLC in order to escape this dealer status? I had an individual that I read up on in the paper one time and they considered him a dealer. And, man, he had problems after that, so I don't want to get in that situation. but thanks for your thought. All right. Okay.

Well, great question. And if you don't know what our caller is referring to, I dedicated the last half of last episode to something called dealer status. I went into detail and explained what it was. You know, it's a status that the IRS places on you to determine how much tax you're going to pay. And if you get pegged as a dealer, you're going to be paying a business. you're going to be paying a bonus tax on top of the tax you're already paying.

So, you know, as real estate investors, it's where one of the benefits of being a real estate investors, you essentially will end up paying less tax. But if you get pegged as a dealer, you very well will be paying more tax. You're going to have to pay what's called self-employment tax, which I believe is right around 15%. That's on top of your normal 25, 30, 40% tax bracket that you're, in. Now, I'm not going to go into it any deeper than that because there are lots of details and that's not the only aspect of it, but that's the main one that people try to avoid getting,

you know, avoid getting the IRS's attention and getting labeled as a dealer. So you can listen to that last episode to catch up. But the specific question is how many deals per month determines that you are a dealer. And, you know, this is really the tricky part of the whole thing or the messed up thing, if you will. It's not written in the code. So, Here's exactly what the code says about your taxable income as a real estate dealer. You are a real estate dealer if you are engaged in the business of selling real estate to customers with the purpose of making a profit from those sales. That's pretty broad, right?

And yeah, well, no duh. Why am I in real estate unless I was here to make a profit, right? Well, in that definition, you are a real estate dealer if you are engaged in the business of selling real estate to customers with the purpose of making a profit from those sales. You are really a dealer depending on what your intent is. It doesn't say how many. As I mentioned last episode, it could be as little as one or two deals a year and you could get dinged by the IRS as a dealer.

Or you could do one a week and not get dinged. It's subjective. So here's what I've done. I make sure that I actually qualify under the IRS tax code as a real. real estate professional. I don't want to go into what all that is, but it's basically I spend most of my time investing in real estate. So that classifies me as a real estate professional. And here's how that helps me. Because I do both, because I buy property with the intent to sell to a customer to make a profit, whether it's wholesaling or fix and flipping, and I also hold property as

investments that I'm going to keep for myself that I have no intention of selling for a profit. And what the real estate professional designation allows me to do, or anybody for that matter, that gets that designation, I can take the deductions and depreciation from my hold investments to offset the profits from my flipping investments. That helps me significantly. Also, I conduct my flipping business inside of an S-Corp, which allows me to take advantage of the salary dividend split. and that essentially cuts my self-employment tax and half, and then I use the deductions from my hold investments to eliminate the other half, and then some. So this is why this question actually comes up so often.

There isn't an answer for it. It's just so much gray area for you to swim around in. The IRS does not define a number of properties that classifies you as a real estate dealer. It's your intent, or I should say, it's the IRS's opinion of what your intent is that classifies you as a dealer. So even if your intent is not to make a profit,

if your actions show otherwise and the IRS believes that your intent is, then they can label you as a dealer. Now, there are strategies to combat this. I have found one that works very well for me. I just kind of explained the Cliff Notes version of it. But my strategy won't necessarily work for everybody. The important thing to get here is

I didn't create my strategy. My CPA and my tax attorney created it. They are one of the same. same, Mr. Mark Kohler, a friend of the show here. He conducted an online training for us here a couple weeks ago, and he's been on the show featured in an episode. And you can go ahead and Google him if you'd like. He's a master at it. He's a very awesome strategist and consultant for this matter. And he works nationally, too. So you can Google him or just go to his website, mark j.com. And Kohler is k-oh-h-l-e-r, markj-j-color.com.

All righty, next question. Hi, Matt. This is L.A. from Baltimore, Maryland. I've been hearing a lot about the open escrow, closed escrow. My question is, what does it cost to open escrow? What kind of fees are associated? I know we're using other people's money. But when you take the contract to the title company,

what do you have to put down in order for them to start working on your, on your contracts to find out the particular development property. That's my question and look forward to hearing your answer, either in email or on the podcast. Take care and have a blessing. All right. Great question. Another good question. Thanks, L.A.

How much to open escrow? And, you know, I'm learning that the more states that I work in, the more states that I do business, in escrow is not called escrow in every state. So if that word is unfamiliar to you, then that's okay. It's probably defined or referred to in a different way. But let's define escrow real quick. Very simply define escrow is a deposit of funds, a deed or other instrument. Aha. Got it? So it's a deposit of funds, a deed, or other instrument by one party for the delivery to another party upon completion of a particular condition or event. Now, depending on the state, that you're in, you'll either have an escrow officer, a title officer, or a closing eternity

that will take the deposit. Now, that can be a deposit of funds, can be a deposit of a deed, or another instrument, for example, an IOU. Now, the question is, how much is necessary to open escrow? Technically, escrow could be opened for a dollar. It's whatever is agreed to between the buyer and the seller. the amount of the earnest money typically is what it would be. Now, having said that, I've completed many deals where there was no earnest money at all.

Nothing was written into the agreement. So I suppose actually there really is no minimum. And it doesn't have to be actual money either. Now, there will certainly be fees, but it's customary that those fees are taken out of the seller's proceeds at the close of escrow. Or between the seller and the buyer, that's even to go. but it's taken out of the whatever money is transferred into the deal and it's taken out in the back end when it closes not up front now I've never worked with a closing attorney before they may ask for something up front I'm not totally sure on that so to answer your question in

most cases nothing is required to open escrow the operative word they're being required nothing's required to open escrow as far as a dollar amount if you have an executed contract you walk into your escrow office or whatever your state's equivalent is, maybe your title office or your closing attorney, and just say, here's a contract. I'd like to open escrow and hand them the contract. And from that contract, typically escrow instructions will be drafted. So the contract is really just instructions for the escrow officer, the title officer, to create the escrow instructions.

Okay? So it's instructions for the instruction. So those escrow instructions are drafted, and then those instructions are sent to both parties of the transaction. Okay, so it's kind of your contract is turned into another contract. And once both those parties sign the instructions, escrow is

officially open. Now it's time to conduct your due diligence, to conduct your title searches, to get your loans in order, if there are any, and solve any problems or challenges that come up. I actually like to call the escrow period, the problem solving period,

because there seems to be always problems. You know, some big, some small, some unnoticeable, some that just kind of go away by themselves, whatever it may be. But I call it the problem solving period. Anyway, once both parties are in agreement that the paperwork is in order and funds are transferred, funds are dispersed, title is exchanged, escrow closes. And that can be as quick as a few days, but most of the time you're looking at a minimum of 15 days, I guess.

And as long as 90 days or six months, it just all kind of depends on the size of the deal. All righty. So thanks for the question. And if you happen to have a question, comment, or concern that you'd like me to answer or address here live on the show, please share them with me on the Epic Real Estate Investing Hotline, just like our guest did today. And that number is 1.888891-7203. 1-88-88-891-7203. Okay, doke. So next week I have another Epic Pro Academy member success story, and I know this is some of your

your favorite stuff. He actually took a very different route than our last few guests did. And he's doing amazingly well in less than a year. He is out of the rat race. Can't wait to share that one with you. Okay. All right. So that's it for today. Until next time, 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 education. 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.

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