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The Getting Complete Guide to Started Day 1 Finding & Analyzing Deals Day 2 Choosing A Profit Strategy Day 3 Putting It All Together.

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Presentation on theme: "The Getting Complete Guide to Started Day 1 Finding & Analyzing Deals Day 2 Choosing A Profit Strategy Day 3 Putting It All Together."— Presentation transcript:

1 The Getting Complete Guide to Started Day 1 Finding & Analyzing Deals Day 2 Choosing A Profit Strategy Day 3 Putting It All Together

2 Day 2 Choosing A Profit Strategy Contracts From Contract to Closing Table Wholesale Rehabbing Rentals Managing Exit Strategies Business Entities

3 At the end of this session, you will be able to: 1.Define Types of Contracts 2.Identify essential elements of a written contract 3.Explain how to complete a contract 4.Summarize the ways to present an offer GOALS Day 2 – Choosing A Profit Strategy Contracts

4 Types of Contracts Day 2 – Choosing A Profit Strategy Contracts Purchase & Sale – Standard Contract Installment Contract – Title does not pass until conditions are met Option Contract – Set for a fixed period, consideration, specified price Listing Agreement – Between seller and broker

5 Essential Elements Day 2 – Choosing A Profit Strategy Contracts Competent parties Offer and acceptance Consideration Legality of object In writing and signed

6 Important Points Day 2 – Choosing A Profit Strategy Contracts Buyers Name Sellers Name Property Address/Legal Description Sale Price/Deposit Time for Acceptance Financing Assignability

7 Important Points Day 2 – Choosing A Profit Strategy Contracts Closing Date Inspection Title Escrow Sellers Disclosure Addendums Escape Clauses

8 Ways to Present An Offer Day 2 – Choosing A Profit Strategy Contracts 1. Verbal – would you 2. Letter of Intent – non binding 3. Written Contract – binding

9 A-B-C Offer Day 2 – Choosing A Profit Strategy Contracts All Cash [Wholesale Offer] 100% Seller Finance [Retail] Creative Option Solution [Lease Option, Combo]

10 What we covered this session: 1.Types of Contracts 2.Essential elements of a written contract 3.How to complete a contract 4.Ways to present an offer SESSION REVIEW Day 1 - Finding & Analyzing Deals Contracts

11 Day 2 Choosing A Profit Strategy Contracts From Contract to Closing Table Wholesale Rehabbing Rentals Managing Exit Strategies Business Entities

12 At the end of this session, you will be able to: 1. Define Key Closing Terms 2. Name the Team Members 3. Define Key Action Items 4. List Closing Documents 5. Read A Settlement Statement GOALS Day 2 – Choosing A Profit Strategy Contract to Closing Table

13 Day 2 – Choosing A Profit Strategy Contract to Closing Table Key Terms Closing Statement A detailed cash accounting of a real estate transaction showing all cash received, all charges and credits made and all cash paid out in the transaction. Deed A written instrument that, when executed and delivered, conveys title to or an interest in real estate.

14 Day 2 – Choosing A Profit Strategy Contract to Closing Table Key Terms Escrow The closing of a transaction through a third party called an escrow agent, or escrowee, who receives certain funds and documents to be delivered upon the performance of certain conditions outlined in the escrow instructions. Prorations Expenses, either prepaid or paid in arrears, that are divided or distributed between buyer and seller at the closing.

15 Day 2 – Choosing A Profit Strategy Contract to Closing Table Key Terms Survey A pictorial depiction of land and the improvements on it and shows boundary lines with measurements and bearings, buildings, easements, etc. Title Evidence Proof of ownership of property; commonly a certificate of title, an abstract of title with lawyer's opinion, title insurance or a Torrens registration certificate.

16 Day 2 – Choosing A Profit Strategy Contract to Closing Table Key Terms Title Insurance A form of insurance contract which guarantees to indemnify an owner or mortgagee of property for damages suffered as a result of undiscovered title defects which arise later. Title Search The act of examining in detail the public records relating to ownership of a parcel of land to ensure that the current owner has clear title, free of any liens, claims, mortgage or competing and adverse interests.

17 Day 2 – Choosing A Profit Strategy Contract to Closing Table Parties Involved Real Estate Brokers Attorney Escrow Agent Loan Officer Appraiser Insurance Agents Lenders

18 Day 2 – Choosing A Profit Strategy Contract to Closing Table Key Action Items Choose Closing Date/Agent Order/Examine Title Notify Seller of Defects Accept/Reject Title Obtain Survey Inspections Review Leases Obtain Insurance

19 Day 2 – Choosing A Profit Strategy Contract to Closing Table Closing Documents Affidavits Bill of Sale Deed Insurance Policies Satisfaction of Liens Mortgages Pest Control Report

20 Day 2 – Choosing A Profit Strategy Contract to Closing Table Closing Documents Tax Receipts Survey Warranties Utility Bills Leases Service Contracts Title

21 Day 2 – Choosing A Profit Strategy Contract to Closing Table Settlement Statement Buyer debits and expenses Seller debits and expenses Credits due to buyer Credits due seller Net balances

22 What we covered this session: 1. Key Closing Terms 2. Team Members 3. Key Action Items 4. Closing Documents 5. How to Read A Settlement Statement SESSION REVIEW Day 1 - Finding & Analyzing Deals Contracts

23 Day 2 Choosing A Profit Strategy Contracts From Contract to Closing Table Wholesale Rehabbing Rentals Managing Exit Strategies Business Entities

24 At the end of this session, you will: 1.Be able to compare exit strategies & decide best option 2.Understand how to manage - Wholesales - Rehabs - Rentals GOALS Day 2 – Choosing A Profit Strategy Managing Exit Strategies

25 Determine Exit Strategy Day 1 - Finding & Analyzing Deals Managing Exit Strategies Quick Turn (Wholesale) How much profit for you? The rehabber? Rehab Risk vs. Profit Rental

26 Summary of Strategies Day 1 - Finding & Analyzing Deals Managing Exit Strategies WholesaleRehabHold StrategyQuick flipFix n FlipHold IncomeQuick cash3-6 monthsCash flow Potential $$$$$$ + wealth Credit Req.NoneSome Up front $Very Littlev. little some $ Needed for:ConsiderationRehab + HoldingEmergencies Risk FactorVery LowLowLow-Mid

27 Day 2 Choosing A Profit Strategy Contracts From Contract to Closing Table Wholesale Rehabbing Rentals Managing Exit Strategies Business Entities

28 At the end of this session, you will be able to: 1.Describe how to assign a contract 2.Explain a simultaneous close 3.Summarize the wholesale process Wholesaling GOALS Day 2 – Choosing A Profit Strategy Managing Exit Strategies

29 Wholesaling Day 1 - Finding & Analyzing Deals Managing Exit Strategies Process 1. Seller and Buyer sign contract 2. Buyer submits deposit (escrow) 3. Buyer assigns contract to New Buyer 4. New Buyer replaces Original Buyers deposit

30 Wholesaling Day 1 - Finding & Analyzing Deals Managing Exit Strategies Process 5. New Buyer takes over existing contract terms 6. New Buyer obtains funding and closes 7. Seller and Original Buyer get paid

31 Wholesaling Day 1 - Finding & Analyzing Deals Managing Exit Strategies Example 1.Seller and Buyer agree on contract for property Purchase price = $100,000 2.Contract is assignable 3.Original Buyer assigns contract rights to New Buyer Cost = $5,000 from New Buyer

32 Wholesaling Day 1 - Finding & Analyzing Deals Managing Exit Strategies Example 4.New Buyer purchases property for $105,000 5.Seller gets $100,000 6.Original Buyer gets $5,000

33 Wholesaling Day 1 - Finding & Analyzing Deals Managing Exit Strategies Important Documents Purchase & Sale Agreement - Seller - Original Buyer Assignment of Contract - Original Buyer - New Buyer

34 Wholesaling Day 1 - Finding & Analyzing Deals Managing Exit Strategies Considerations Purchase 60-70% of market value Escape clauses Release from liability

35 Wholesaling Day 1 - Finding & Analyzing Deals Managing Exit Strategies Protecting Yourself Make sure property is under contract Always get a copy of original contract Ensure you are working with original buyer Wholesaler should make less than rehabber

36 Wholesaling Day 1 - Finding & Analyzing Deals Managing Exit Strategies Protecting Yourself Lender approval? FHA: 90-day rule Avoid multiple title transfers Avoid double and triple assignments

37 Wholesaling Day 1 - Finding & Analyzing Deals Managing Exit Strategies Simultaneous Close Two closings take place Contract is not assignable Must take title to property Title seasoning

38 Wholesaling Day 1 - Finding & Analyzing Deals Managing Exit Strategies Creative Assignments!!! Include assignment fee in second closing Use creative financing techniques (trusts) Seller can become the hard money lender Take possession of property Then Sell!

39 Wholesaling Day 1 - Finding & Analyzing Deals Managing Exit Strategies Finding Buyers Newspaper - We Buy Houses - Place Ads seeking buyers Flyers Real Estate Auctions Real Estate Investor Associations

40 Wholesaling Day 1 - Finding & Analyzing Deals Managing Exit Strategies 7 Steps to Wholesaling 1. Negotiate at 60-70% of FMV 2. Set closing date of 30 to 90 days 3. Insert and/or assigns in purchase contract 4. Contingency clauses (Escape clauses) 5. Find a Buyer 6. Assign the contract and collect assignment 7. Inform seller of change

41 At the end of this session, you have learned how to: 1.Describe an assignment of contract 2.Explain a simultaneous close 3.Summarize the wholesale process Day 2 – Choosing A Profit Strategy Managing Exit Strategies SESSION REVIEW

42 Day 2 Choosing A Profit Strategy Contracts From Contract to Closing Table Wholesale Rehabbing Rentals Managing Exit Strategies Business Entities

43 At the end of this session, you will be able to: 1.Describe the five major rehab categories 2.Explain how to estimate rehab costs 3.Understand how to manage a rehab from start to finish Rehabbing GOALS Day 2 – Choosing A Profit Strategy Managing Exit Strategies

44 1. Electrical 2. Plumbing/drainage 3. Structural/foundation 4. Roofing 5. HVAC: Heating, Venting, A/C * Permit required * Use a contractor (professional) Where to Spend Rehab $ Day 2 – Choosing A Profit Strategy Managing Exit Strategies

45 Kitchen Bathrooms Curb appeal Where to Spend Rehab $ Day 2 – Choosing A Profit Strategy Managing Exit Strategies

46 Roofing: per square or 100 sq. ft. Carpet and tile: per sq. ft. Vinyl/wood/laminate: yard (sq. ft. 9 yds) Electrical/plumbing: time & material ($50 – $150/hr) Understanding Rehab Pricing Day 2 – Choosing A Profit Strategy Managing Exit Strategies

47 Kitchen cabinetry: per lineal foot (lf); $100 – $500 Trim/baseboards: $2 – $3 per lf HVAC (heating/air): per ton Door/window: per unit installed Understanding Rehab Pricing Day 2 – Choosing A Profit Strategy Managing Exit Strategies

48 Drywall: per board Painting: per sq. ft. Fencing: per lf Siding: per sq. ft. or lf Understanding Rehab Pricing Day 2 – Choosing A Profit Strategy Managing Exit Strategies

49 1. Find the property 2. Make offer 3. Get signed contract 4. Important dates memo 5. Estimate Repairs 6. Set up professional inspection 7. Put together project overview Managing Your Rehab – Step by Step Day 2 – Choosing A Profit Strategy Managing Exit Strategies

50 8. Secure financing 9. Prepare contractor agreements 10. Set up insurance 11. Prepare budget 12. Closing 13. Utilities 14. Put sign out Day 2 – Choosing A Profit Strategy Managing Exit Strategies Managing Your Rehab – Step by Step

51 Day 2 – Choosing A Profit Strategy Managing Exit Strategies Managing Your Rehab – Step by Step 15. Schedule repairs 16. Post call sheet for workers 17. Photos 18. Advertising/Marketing 19. Cost analysis 20. Cost Summary 21. Document with photos

52 At the end of this session, you have learned how to: 1.Describe the five major rehab categories 2.Explain how to estimate rehab costs 3.Understand how to manage a rehab from start to finish Day 2 – Choosing A Profit Strategy Managing Exit Strategies SESSION REVIEW

53 Day 2 Choosing A Profit Strategy Contracts From Contract to Closing Table Wholesale Rehabbing Rentals Managing Exit Strategies Business Entities

54 Day 2 – Choosing A Profit Strategy Managing Exit Strategies At the end of this session, you will be able to: 1. Understand Due Diligence Process 2. Discuss obligations to the tenants 3. Fill vacant units 4. Understand tenant selection process 5. Collecting rents 6. Keeping Tenants Landlording GOALS

55 Day 2 – Choosing A Profit Strategy Managing Exit Strategies Tenants with leases - Focus on the future - Planning - Controlling Bad Seeds - Opportunity for creative financing - Raising rents (at turnover) - Update tenant information - Attorney Review Obligations to Tenants

56 Day 2 – Choosing A Profit Strategy Managing Exit Strategies Tenants without leases - Liabilities - Following Rules - Communication breakdown - Financial performance - Getting rid of bad seeds - Creative financing Obligations to Tenants

57 Day 2 – Choosing A Profit Strategy Managing Exit Strategies Handle vacancy history - Maintenance/repairs - Are rents market rates - Property management or lack of Managing Vacancies

58 Day 2 – Choosing A Profit Strategy Managing Exit Strategies Maintenance - Use checklist - Focus on visible items - Focus on mechanical items - Final Walkthrough - Touch up paint/replace carpet - Add safety items - smoke detectors, GFCI switches, etc. Remodeling Vacant Units

59 Day 2 – Choosing A Profit Strategy Managing Exit Strategies Marketing to Fill Vacant Units - Signs - Advertisements - Direct Mail - Flyers - Government Programs Renting Vacant Units

60 Day 2 – Choosing A Profit Strategy Managing Exit Strategies Screening 60% of all property owners rent on looks 56% never do a background check Put a system in place - Voic System - Drive by - Prequalification questions - Minimum standards - Fair Housing Standards Selecting your tenants

61 Day 2 – Choosing A Profit Strategy Managing Exit Strategies Step by Step Policies & Procedures 1. Make sure property is EMPTY 2. Pre-screen with phone system 3. Show property all at once 4. Get application signed 5. Get application fee from renter 6. Verify all of the applicant info 7. Place is not rented until deposit check is in hand Selecting your tenants

62 Day 2 – Choosing A Profit Strategy Managing Exit Strategies Clearly define when, where and how Discount for early rent Monthly pet charge v. deposit Evictions - MUST have P&P Unpaid damages - What will tenants be responsible for? - Minimum damages - liens on personal property Collecting Rents

63 Day 2 – Choosing A Profit Strategy Managing Exit Strategies 1. Why are you moving? 2. Send letters - sorry to hear youll be leaving 3. Offer free gift to say - carpet cleaning, ceiling fans, landscaping, etc. 4. Repair/Appliance policies 5. Timely response for all repairs - All in writing - 3 day guarantee - repair line Keeping tenants

64 At the end of this session, you have learned how to: Understand Due Diligence Process Discuss obligations to the tenants Fill vacant units Understand tenant selection process Collecting rents Keeping Tenants Day 2 – Choosing A Profit Strategy Managing Exit Strategies SESSION REVIEW

65 Day 2 Choosing A Profit Strategy Contracts From Contract to Closing Table Wholesale Rehabbing Rentals Managing Exit Strategies Business Entities

66 Day 2 – Choosing A Profit Strategy Understanding Business Entities At the end of this session, you will be able to: Summarize key characteristics of: Sole proprietorship Partnerships S corporation C corporation Limited Liability Company GOALS

67 Advantages - Easy to set up - Inexpensive - Few regulatory Requirements - Many states dont have fees - No separate income tax filing Sole Proprietorship Day 2 – Choosing A Profit Strategy Understanding Business Entities

68 Disadvantages - Owner personally responsible for debts - No legal protection - Taxed as self employed - Personal assets exposed Sole Proprietorship Day 2 – Choosing A Profit Strategy Understanding Business Entities

69 Advantages - Easy to set up - Inexpensive - Few regulatory Requirements - Losses reported on owners tax returns - Flexibility in establishing responsibilities of partners Partnerships Day 2 – Choosing A Profit Strategy Understanding Business Entities

70 Disadvantages - Personally responsible for debts of the partnership - Partners responsible for all business-related actions of all other partners Partnerships Day 2 – Choosing A Profit Strategy Understanding Business Entities

71 1. Insurance - Umbrella Liability - Builders Risk 2. Create a business entity - Twin Brother - Collection of documents Develop layers of protection Day 2 – Choosing A Profit Strategy Understanding Business Entities

72 Requires paperwork with secretary of state Pay Federal Income Taxes Separate Checking Account Shares of Stock Minutes and Meetings Pays its own taxes C Corporation Day 2 – Choosing A Profit Strategy Understanding Business Entities

73 C Corporation Day 2 – Choosing A Profit Strategy Understanding Business Entities Advantages - Not personally liable for debts of corporation - Ownership transferable through stock - Unlimited life beyond owners - Tax benefits

74 C Corporation Day 2 – Choosing A Profit Strategy Understanding Business Entities Disadvantages - Possible double taxation - More expensive to form than sole proprietorships and partnerships - More paperwork - Schedule C - Minutes & Meetings - Annual Reports

75 Requires paperwork with secretary of state - one checkbox different on the form! Does not pay federal taxes – FLOW THROUGH on Schedule K-1 Better if you are taking disbursements Same paperwork as C - Corporation S Corporation Day 2 – Choosing A Profit Strategy Understanding Business Entities

76 S Corporation Day 2 – Choosing A Profit Strategy Understanding Business Entities Advantages - Avoidance of double taxation - Shareholders not personally responsible for liabilities of corporation - All other advantages of C Corporation apply to S

77 S Corporation Day 2 – Choosing A Profit Strategy Understanding Business Entities Disadvantages - Can only have 1 class of stock - Shareholders limited to 75 shares - Shareholders must be individuals, estates, or qualified trusts - Shareholders cannot be non- resident aliens

78 Requires paperwork with secretary of state Protection of partnerships mixed with benefits of partnerships Best of tax codes and protectionary features Flow through Better tax codes for passive income Limited Liability Company Day 2 – Choosing A Profit Strategy Understanding Business Entities

79 Members decide on management Disbursements determined by agreement IRA can be a member of LLC Can form a 401K Limited Liability Company Day 2 – Choosing A Profit Strategy Understanding Business Entities

80 Limited Liability Company Day 2 – Choosing A Profit Strategy Understanding Business Entities Advantages - Pass-through taxation - Members not held personally liable - No restrictions on number of owners (members) - Flexibility in structuring management of company - Less paperwork

81 Limited Liability Company Day 2 – Choosing A Profit Strategy Understanding Business Entities Disadvantages - More paperwork than general partnership - Ownerships harder to transfer than with corporation

82 At the end of this session, you have learned how to: Summarize key characteristics of: - Sole proprietorship - Partnerships - S corporation - C corporation - Limited Liability Company Day 2 – Choosing A Profit Strategy Understanding Business Entities SESSION REVIEW

83 Day 2 Choosing A Profit Strategy Contracts From Contract to Closing Table Wholesale Rehabbing Rentals Managing Exit Strategies Business Entities

84 The Getting Complete Guide to Started Day 1 Finding & Analyzing Deals Day 2 Choosing A Profit Strategy Day 3 Putting It All Together


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