Epic Real Estate Investing - Writing Offers that Pay | Episode 150

Episode Date: March 23, 2015

If you are stuck in your business or not doing as much business as you’d like, this podcast is the answer!  Matt explains how to focus on the activities that count (including an important new daily goal) in order to ensure your success.  He also shares the simple formula he uses to calculate his all-cash offer price.  Enjoy! ------- 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

Alert, alert! Real estate investors, listen carefully. A closely guarded secret reveals that closely guarded secrets aren't really that closely guarded. Seriously, go to find motivated sellers ASAP.com to get the inside scoop on how the nation's most successful real estate investors really find their deeply discounted properties. Go to find motivated sellers ASAP.com. Deeper discounts, less secrets. Find motivated sellers ASAP.com. Broadcasting from Terrio Studios in Glendale, California, it's time for Epic Real Estate Investing with Matt Terrio.

Uh, you. What's that? Hello, and welcome. Welcome to Epic Real Estate Investing, the place where I show people how to escape the rat race using real estate. Just shift your focus from making piles of money to making streams of money. And I mean, you just got to do that one thing and just do it one time and let your actions follow. And you are on your way to financial freedom. It's not the most exciting path, but it is the fastest.

And once you get there, life then becomes exciting. And it's not a complicated shift either. Real estate investing is not a complicated business. In fact, it's rather painfully simple. Yet it's very easy to overthink it, to complicate this business and make it painfully complicated. And, you know, I discussed a big portion of this in last week's episode, bringing you up from, you know, generating the lead to contract and doing that in three simple steps.

the simplest steps that I could express this business in. You know, regardless of whether it's your intent to wholesale, if it's your intent to fix and flip or buy and hold or do lease options, create notes, buy and sell notes, I mean, it doesn't matter what part of this business you find most intriguing, what you find most profitable or most effective. I mean, it doesn't matter. Every strategy begins in the same way.

You've got to generate the lead. You've got to communicate with the lead, and you've got to make an offer. So if you're stuck in your business or not doing as much business, business as you would like, you may be, and likely are overthinking it, overcomplicating a very simple business. And it's worth looking into. So go back and listen to last week's episode if you missed it. I covered those three simple steps every real estate investor must take, regardless of their strategy. And it may be just what the doctor ordered for your business.

So today I want to discuss step three in a little bit more detail, making an offer as this is the step that if you do not do or if you do it incorrectly, you will not do deals. I mean, you can do steps one and two perfectly, of which are both absolutely essential, by the way. But if you drop the ball at step three, you will not do deals. So we'll cover that in 30 seconds right after this. Real estate investors, you need to know this. If you do not have a lead capturing website, a recent study reveals that you are invisible to 90% of the people that want. to do business with you. We are Epic Real Estate Websites.com, and we have an easy three-step

solution for you. Step one, select a design. Step two, choose your domain name. Step three, check out. Boom! You are now online capturing the names, emails, and phone numbers of people that want to do business with you. Go to Epic Real Estate Websites.com. Act now, and your domain name is free. Epic Real Estate Websites.com. Last episode, I left you with a very simple focus. A simple daily focus. And that focus was to wake up each morning and make it your sole mission to get at least one offer rejected.

And the first thing I want to point out here is to get an offer rejected every day, you must write an offer every day. That's number one. Number two is when you get an offer accepted, you must write another offer that day. And keep writing offers until you get one rejected. You have not done your job for the day,

until you get at least one offer rejected. If you get two offers accepted, what is there left to do? Yep, write another offer. You see, the destination is to get offers accepted, but the journey is through offers rejected. It's your intent to get your offers accepted. I'm not saying it's your intent to get them rejected.

Your intent is to get them accepted, but your daily work is not done until you get one rejected. So make that. your daily discipline and you will do deals. You will be just fine. In fact, make that your daily discipline and you will absolutely crush it. Now, obviously, the more offers you get accepted,

the more deals you will do and the more money you will make. So let's cover some points to getting more of your offers accepted because that is the intent, right? Your goal is to get at least one offer a day rejected, but you're, yeah, that's the path. The ultimate goal there is to get offers accepted, but it just comes through getting offers rejected or rejected.

Got it? So first thing is first. You must decide on what your own minimum deal standards are. What makes up a good deal for you might be totally different from me, for me. And what makes a good deal up for the guy down the street might be different from both of you and my deals. So what I'm really getting out here is what is the least amount of money that you are willing to work for? What is the smallest ROI that you'd be willing to accept on a deal?

You need to know these two numbers for yourself. What's the least amount of money you're willing to work for in a deal? What is the smallest amount or smallest ROI you'd be willing to accept? And you need to know these two numbers because they're the foundation of what you'll put into your offers. I mean, you shouldn't write and submit an offer that isn't going to pay you the minimum that you're willing to work for. And I know that sounds like a no-brainer, but investors do it every day, every day. They write offers to get them accepted for the sake of getting them accepted,

only to find they didn't leave enough meat on the bone or didn't account for enough meat for the person they're selling it to get their share, their profit, while keeping their own share, their own minimum profit as well. So stop doing that. Please stop doing that. Stop writing offers that don't work for you.

Stop writing offers that didn't have a chance the moment they got accepted. Stop writing offers that don't pay you at least the minimum amount that you are willing to work for. All right? So how do we figure that out? Let's just make it really simple. It's kind of the theme, these last two episodes. Let's make it simple.

And I'm going to walk you through a basic formula. And I actually have adopted this. I had my own formula. I've had a couple formulas over the years. I kind of switch when I'm trying to get more efficient and be more direct. But our volume is really increasing. here. And so I gave about six months ago, I implemented Sean Terry's formula, and it's just allowing us to process multiple offers and run through deals and really work the numbers. So I'm

to walk you through that basic formula. And I'm going to give Sean Terry credit for that formula only two more times, and then it's going to be mine. That's the rule. If you borrow something from somebody, you got to give them credit three times, then it's yours. That's what someone told me one time. So I'm taking it. So thanks, Sean. So what you want to do is you want to run your comps to determine fair market value for the property. So run your comps. And find anywhere from three to five comparable sales, you know, what those, and sales being the keyword there, comparable sales, properties that have sold, not properties that are for

sale, properties that have sold. You want to find them comparable in location, comparable in property type, in square footage, and kind of want to get them like kind of bundled up in a nice close time frame, say in the last 90 days, properties that have sold in the last 90 days. And please know that this is not an exact science. So you may have to fudge around with some of these variables to find at least three comparables. You know, some areas you may find more than enough and it's not a big deal. And, you know, just borrowing the message from last episode, don't overthink this.

Don't get stopped because you only found two comps in the last 90 days. Worst case, okay, I'll give you a secret of what we're doing here. We're not even running comps anymore. We're just using zillow.com's estimate. We're using that as a starting point. So if you want, if you want to make this really easy, use that number if you can't come up with your own comps. You know, in the interest of efficiency and working through the numbers, that's just what we've started doing for this portion of the process. We've eliminated the comp process as it can just be very time consuming.

And we're just plugging in the Zillow's estimate. We can always renegotiate later if we get it wrong, but it's a good starting point. You know, we can all sit there and debate the accuracy of their algorithm, ad nauseum, because I've done it. And it hasn't been that accurate in the past. I think Zillow has done a great job. I think they're constantly improving their service and what they offer. And I think the algorithm is improving as well.

And we could throw hypothetical situations at it all day. I know you've probably got stories or heard stories how it was way off or it was too high or it was too low, whatever. But stop it. Don't overthink this. Okay, just stick with me here. Now you all got me lost.

Where were we? Yeah, fair market value. Okay, start your office. offer with fair market value and take 70% of that. Why 70%? Because Sean said to. No, just kidding. It's just a starting point. That's all. It's arbitrary, really, though. I mean, it represents the discount. This number right here, taking 70% of fair market value, what it does is it represents the discount or the profit that you would be passing on to your wholesale buyer. If your intent is to wholesale the property, and even if it's not, it's in your best interest.

to account for this. Just in case things don't work out for your other intent. Meaning, if plan A is to fix and flip or if plan A is to buy and hold, and somewhere in the process you discover that your plan A isn't going to work out for this property, well, you still got plan B to wholesale the property. So just go ahead and wholesale the property, put some money in your pocket, and move on. So that's the reason for taking 70% of the fair market value. All right.

Now, now we've got 70% of fair market value. now subtract the cost of repairs. Typically, at this point, you don't know what the repairs are. And actually, you very likely don't have a freaking clue as to what the repairs are. So what do you do here? Do you wait to get a bid? Do you wait to get an estimate? Do you wait to have the property inspected or the property manager drive by?

No, you don't have the time for that. You guess, all right? The number we use here in the office is $10 per square foot. And there again, it's just a ballpark guess. And this can all be changed later. our intent here is to get this property under contract. And we're just going to make the best educated guesses we can based off the experience that we've got.

And, you know, if we have more information on any given property, we know it's, and we know it's going to be a light rehab, we'll use $5 a square foot. That's what I mean by educated guess. If we know it's going to be to need extensive rehab, we'll use $15 a square foot. But the majority of the time, we just go with $10 a square foot and we subtract that number in our offer equation. So we've got 70% of fair market value minus repairs, minus $10 per square foot. Now, the next number you subtract is your profit.

Okay? Don't forget this number. It's funny that I have to remind you, but people forget it every day. You know, you took some meat off the bone for the wholesale buyer. You took some meat off the bone for your repairs. Now you've got to take some meat off the bone for you. I mean, this whole thing is for waste unless you get paid. So don't forget your share.

Like I said, I mean, this sounds like a no-brainer, but it happens daily. So don't forget your cut. If the minimum amount that you are willing to work for, if your minimum deal standards, the minimum profit that you're willing to get out of bed for is $5,000 per deal, then factor in, say, $10,000. So you've got some room to negotiate if you need it. All right? So after you subtract your cut, whatever you're left with, that's your offer.

There's your offer. It's your all-cash offer. 70% of fair market value minus repairs, minus your profit, equals your all-cash-cash-offer. I know what you're thinking. Isn't that going to be kind of low? I mean, no one's going to accept that. If I write offers like that, I'll never do a deal. No one will ever accept it.

I mean, who in their right mind would accept that? Why wouldn't they just put it on the multiple listing service and sell it to the highest bidder? I mean, the highest bidder in that sense would certainly give them more than what I'm offering, right? First, tell that little voice in your head. Thanks for sharing. Now, leave me alone. second, understand that most people will not accept this offer. So you're not totally insane for thinking this offer is too low.

So who would then accept this offer? Well, a motivated seller will accept this offer. Remember, the foundation of every deal lies within the seller's motivation to sell. A motivated seller will accept this offer. Isn't that who you're looking for? isn't that what your marketing is all about to find motivated sellers? Yes. I mean, you've done everything you can up front to sort that motivated seller through the list that

you chose to target. That's why you choose high equity or that's why you choose, you know, absentee owners or absentee out-of-state owners. That's why you choose vacant properties. So you did a small amount of sorting right there to increase the likelihood of finding motivated sellers. And then you sorted them even further when they responded to your marketing, right? and then you sort of them even further when you spoke to them.

So how do you know when you have a true motivated seller? They sell. But you'll never know. You'll never know that they'll sell until you submit your offer. So don't overthink this. Just submit your offer. And if it gets rejected, success. Your work for the day is done.

Or it can be. I mean, no one's going to stop you from submitting more offers. but the minimum required is done. Look at it this way. If you submit one of these offers every day, that makes 30 offers submitted at the end of the month. What are your chances of getting one out of 30 accepted that month? You probably can't answer that,

as you probably have never done that. So I'll answer it for you. They're pretty good. Your chances of doing a deal per month are darn good, in fact, operating this way. And even if you didn't do a deal in your first month out of these 30 offers, how do you feel about your chances after doing this two months in a row and having 60 written offers out there in your marketplace?

Because you're not in this just for 30 days. If you are, don't even start. Don't waste your time. This is a business. It's a real business. And if you expect it to pay you like one, you need to treat it like one. You need to run it like one. You need to commit to it like one.

I mean, you wouldn't go open up a restaurant and quit after 30 days if no one came to eat your food, would you? No, you'd have way too much invested. You'd have made too much of a commitment up front to quit in 30 days. You may change your recipe. You may change your prices. You may change your service. I don't know, but you wouldn't quit after 30 days. You wouldn't invest in a franchise just to see if it would work, would you?

No. You would first make a commitment to that business. before you ever pulled the trigger, before you ever took on such an endeavor. And you need to do that here too. Make it a commitment to run your business like a business. This is a business. And you are in the business of making offers. That's what you do.

Making consistent offers, meaning daily, and being persistent about it. If you're not making offers daily or consistently, you're not doing this business. You may think you are. I mean, you may have a great website. You may have multiple websites. You may have a killer postcard. You got the silver bullet postcard that gets right through and gets everybody's attention. And you may have flashy business cards that make people at the RIA meetings go, ooh.

You may have your car wrapped with your I buy houses image. You may have office space. You may have beautiful office space. You may have a great VA setup that fields all your calls. And you may report to work every day and post your classified ads. And you may have the neighborhood kids running like a well, machine posting your bandit signs on the weekends. You may have the best systems in place, but if you're not making offers daily, you're not

doing this business, and it's as simple as that. And conversely, if you don't have a good website, if you don't have business cards, and your marketing isn't optimized, and you're working out of your basement in your mom's house, but you are writing offers every day, you are absolutely. crushing this business. And it's as simple as that. You know, by the way, what I've found recently is most Epic Pro Academy members,

they don't even realize this. The basic cash offer formula that I just went through, 70% of fair market value minus repairs, minus your profit equals your all cash offer price, that is option number one of the three option letter of intent calculator inside of the Epic Pro Academy. So even if you're not going to submit a three option letter of intent,

you can use the quick and easy calculation, later right there that comprises option number one, and you'll have your all-cash offer number in a matter of seconds. Just an FYI for the Academy members. And speaking of the three-optional letter of intent, I'm going to go over that in some more detailed next episode and share with you how it's becoming one of the more powerful tools, if not the most powerful tool in my business. So that's next week.

And tomorrow, you know, if all of this that I've been going over sounds like just way too much work that you either don't have the time for or the desire to do, catch me tomorrow on my new podcast. Turnkey real estate investing. It's real estate investing for busy people. Yes, indeed. If you're strapped for time, you do have options. So go ahead and search wherever you're listening to me right now. Search turnkey real estate investing and I'll see you tomorrow. Otherwise, I'll see you right here next week. 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.

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