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Table of Contents

Training Session One .......................................................................................................... 1 Training Session Two........................................................................................................ 33 Training Session Three...................................................................................................... 63 Training Session Four ....................................................................................................... 98

Foreword

This training session series was originally a four-week teleseminar on Distressed

Property Investing. The goal of the sessions was to rip apart the various aspects of

distressed property investing and explain them in a way that is easy to understand and

uncovers new profit centers for all who listen and learn.

The first session is devoted to understanding the “Big Picture” of the distressed

property investing business.

The second session stresses the point that you do not need to overcomplicate the

distressed property investing business and points out the most common areas where real

estate investors destroy their own success.

Next, the third session details ways in which you can take the tools you have

learned and explode your real estate investing business.

Finally, the last session highlights the value of time management in increasing

your per-hour rate.

This compilation of information is invaluable to those real estate investors who

want to reach their full potential in the market. It provides practical tools for everyone

from the novice to the seasoned investor.

Read on, take notes, take action, and watch your success skyrocket!

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Training Session One This is Series Training Session One in the Distressed Property Investing

teleseminar series that I am going to be putting on over the course of the next four weeks.

My goal is pretty simple. It's really to take and dissect the different aspects and areas of

the distressed property business and make it all kind of come alive and make sense. And

what I mean by that is I've been investing in real estate for the last ten years, and when I

started investing in real estate, I really didn't know what I was doing. You know, I was

spinning left, and I was spinning right, and I was up and I was down, and I was absorbing

everything I could and trying to take all these little pieces of the real estate investing

business and tie them into something that worked.

Over the course of about two and a half or three years of doing things the hard

way and not really knowing what I was doing, then I started to figure some things out. I

started to pull some of the various pieces together and make a little bit more sense of this

total business. That came through investing my time, like you are, in getting trained and

educated and listening and hearing and applying different things and then taking my own

personality and putting it into this business and making it become successful over time.

And so really over the course of the last seven or so years, the business has

completely evolved and transformed and taken shape for me. And what that has allowed

me to do is clearly see, no matter where I am in the big picture of the real estate market,

no matter what is going on out in the lender-mortgage industry, no matter what is

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happening in my local area, no matter what is happening in my own business, I can step

back and take a big picture and a small picture look at my business and make some

decisions to move it forward successfully. The key to investing in real estate successfully

is being able to change with changing times as you have to, because what works today

didn't work a year ago, and it may not work two months from now. So having the ability

to kind of dissect your business from a business level is really, really absolutely key.

Now, we're going to focus on that first big picture, and then each section in our

series over the course of the next several weeks is going to take a little different piece of

this bigger puzzle and break it down. And so now we are going to start with just looking

at the overall what is the distressed property business, and how did it come together for

me, and how did it make sense.

For those of you that get emails from me, maybe you're on an email list, you see

things that I put out there over time. I always talk about my simple real estate investing

business plan. This is the first step in breaking apart, looking at the distressed property

investing business and saying, okay, how does this work for me, and how does this apply

for me. And so, in a nutshell let me give it to you, and I'm going to break it apart in a

little bit more detail and talk to you about why this is important.

The three different aspects of the business are really this, and it's our simple

business model:

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1) Wholesale

2) Retail

3) Hold

These are the three types of distressed property investors in a big picture look out

there.

Wholesale

Wholesalers are buying specialists. They are marketing specialists. They are the

guys and gals that control the wholesale pricing of the market. Wholesalers are experts at

putting the information out there and letting people know that they are a buyer. They

control the wholesale pricing side of the market.

Retail

These are the rehabbers, the retailing side of the business. Rehabbers are the

construction experts. They are the guys that buy a property, renovate it, and sell it to a

retail homeowner for a profit.

Hold

The third type is the landlords, the buy and hold investors that are really buying

for the long term wealth building aspect of the market and of real estate.

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Now, if I break those apart, why do I think that is critical? Hang with me in this.

If you have thought through real estate investing for any time that sounds pretty simple,

but let me make a very distinct difference. Most people think of wholesaling, rehabbing,

landlording, buying and hold, just like they think of short sales and foreclosure investing

and lease options and all of the other technical arrows in your quiver. And I think they are

very different.

What I just said is technical arrows in your quiver. You know, you can go out and

you can find trainings on a lot of different aspects of the real estate investing business.

You can learn little techniques that are really critical on negotiations. You can learn

techniques on short sales. You can learn techniques on buying subject to. These are all

buzz words out there in the real estate investing business. But all of those are nothing

more really than technical tools that you can put into your tool chest.

The bigger picture is being a wholesaler, a rehabber, or a landlord. The reason I'm

bring us back to those three things is because what do wholesalers that specifically

market to foreclosure types of opportunities have to be good at? They probably have to

be good at doing short sales. They have to have that technical arrow in their quiver to

negotiate a short sale.

Now, that person that specifically markets to a foreclosure type of an opportunity,

that person that is an expert at doing a short sale because they have that specific skill,

they have to begin to think through their exit strategy. What is their exit strategy? Are

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they just going to flip the property, sell it to another investor for a small margin? Or are

they going to actually close on the property and maybe rehab it themselves? Maybe they

are going to close on it, fix it up a little bit, and they are going to hold it long term as a

landlord.

You see, being a wholesaler is the start of the whole distressed property business.

A lot of real estate investors, when they think about first looking for an opportunity to go

out and invest in real estate, what do they think to do? They think about going to the

MLS, maybe through a real estate agent, and looking at properties, and driving around

and finding opportunities to buy, and looking at houses and running numbers, and all

those things.

Wholesalers have that piece figured out, and most of the time they are not

working with real estate agents. Some of the times they are, but a lot of times wholesalers

have two distinct parts of their business. Remember, they are marketing experts. They

control the buying side of the business. So wholesalers are really the start of the

distressed property business for most people, or at least they should be. They should be

the start of the distressed property business for most real estate investors, either as a

wholesaler or if you are a rehabber buying from a wholesaler.

Rehabbers are just, again, that next level of person that says I'm going to close on

the property; I'm going to fix it up; and I'm going to sell it for a much larger profit than

what a wholesaler earns. Landlords are looking for the long term buy and hold aspect.

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So if you think about the distinct and plug in the blank, if you go online and you

do any research for real estate investing or certain, specific skills that you can find, even

trainings. I've done trainings on rehabbing. How do you successfully rehab? How do you

estimate construction costs? What level do you need to fix up at? That's another technical

arrow in your quiver that is important if you are going to do any of the other three aspects

of investing in real estate.

A Lesson from Warren Buffet

So what is it that distressed property investors are seeking? What are they trying

to accomplish? Well, before I talk about that, I want to tell you a little story. This is a

story that was about a month and a half or two months ago. I was watching TV at night,

and an interview came on television with Warren Buffet. What the interviewer asked

Warren was a simple question. What is it that he does?

It was kind of a very open-ended, we're not sure where this is going to go question

to Warren Buffet. And he was just on the early stages of a trip that he was going to be

taking to Europe, across seas. So he began talking about that upcoming trip, and what he

began to say is that they had about a hundred business owners across Europe that they

were planning to go and meet over the course of this around the world trip. He said that

his goal in meeting the business owners was to let them know that Warren Buffet's

company, Berkshire Hathaway, was a buyer in the market.

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He kind of diverged for a second, and he went to a story about one of their recent,

large Berkshire Hathaway annual conventions, where all of the stockholders or a lot of

the stockholders come in. It's a major, major event back in Nebraska where all of these

people are sitting in this large convention center, and Warren is up on stage with some of

the other board members. Questions from the audience keep hitting him. We're sitting on

all of this cash. We have a ton of cash, and why aren't we putting it to work? Why aren't

we buying businesses? Why aren't we making investments? Why aren't we doing things?

And so he was getting hit and hit and hit with these questions, and he finally took

the mike and he said, "Look, I don't like sitting on my cash any more than you do. I don't

like sitting on your cash any more than you do. But unless I see a great deal, it's better to

sit on the cash and be ready to act when the deal comes along than it is to jump in the

game and overpay for something and end up with lower returns. We'll do better in the

long run by being patient than we will by being too aggressive, too emotional, and

overpaying."

Then he kind of went back to his trip that he was getting ready to go on to Europe.

He said, "You know, most business owners that I meet with should never sell their

business to Berkshire Hathaway. They have a good business; they have a good operation;

it makes them money. We're not their buyer."

Why? Why was Warren saying that his company was not the right buyer for

most? Well, it's simple. It's because he was looking for opportunities to buy at massive

discounts, significantly discounted prices on existing operating businesses. He wanted to

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buy instant profits, instant upside, instant cash flow. And most people are not going to be

in a position where they need to take that instant significantly discounted offer from

Warren Buffet. But that's what he does great.

So he meets with a hundred business owners across Europe, and he says this.

"Over the course of the next two to maybe three years, two or maybe three of the

business owners that we met with are going to call, and they are going to say something

has changed in our life." Maybe it's a divorce; maybe it's a death; maybe it's a transition

from one generation to another in business ownership. There are a lot of little things, big

things from the point of the business owner that dramatically change their life situation.

When that happens, and when they need cash, or when they need to be out quickly,

Warren wants to be the guy they call.

It's no different in real estate investing. We really aren't in the house business.

We're really in the same, exact business that Warren Buffet is in, and that is looking for

opportunities to create deals and be there when a buyer needs to be out.

So it comes down to our ability to have access to cash or financing or various

sources of funding, so that when the opportunity presents, we can pounce on the

opportunity. That is also our job in the distressed property investing business to be out

there and find as much exposure as we can, so that when the opportunities do come up,

they call us first. Or in the case of a retailer, a rehabber, or a landlord, a buy and hold

investor, they want to be able to access the wholesalers, because it's the wholesalers that

have control of that distressed market. Those two or three business owners from across

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Europe that at some point over the next several years will change their lives, it's the

wholesaler that wants to get that call. It's the retailer that then wants to connect with the

wholesaler and buy it. Or it's the landlord that connects and picks that deal up. So if you

think about it, wholesaling, rehabbing, and landlording play one hand next to the other.

Our Business Strategy

Now, what we do in our business is simple. We are all three. We're a wholesaler,

because we want to control the market, and we want to control access to the deal flow.

For your information, our wholesaling website, you can go look at it, and you can check

it out if you ever want to. It's www.rehabdealscolorado.com. That is a wholesaling

website where we control inventory or we have maybe even closed on inventory and are

reselling it to other investors at significantly discounted prices.

We are also a retailer. We also run twenty to thirty construction crews. Right now,

we have about thirty construction projects underway and in various stages of either demo

or construction or the finish work. So we are active as rehabbers on the retailing side.

If a property doesn't sell to a retail buyer with a new loan and take us back out of

the deal so that we can recycle our cash, then we will hold that property long term for the

cash flow. Now, the key there is that we've bought right up front. What I mean by that is

we have bought at a significant discount. So the business of distressed property investing

is really about solving problems. It's not about houses at all.

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So there are two types of problems, if you step back and look at it that we're

trying to solve. Again, houses are our commodity, and solving problems is our real

business. We are working with people, and we're designing taking our commodity, a

house, and just moving it through our system. That's the key. We want to move it from

the left hand side of the conveyor belt, right through the factory, and out the other side of

the conveyor belt. We want it to move through seamlessly, efficiently, quickly, and we

want to know what our exit strategy is going in.

So there are two types of problems that we are really looking to solve in most

cases:

Problem #1

The first is the beat up house problem. It's a house that has been trashed. It's a

house that has been abandoned, a house that has been neglected, a house that has been

sitting for years and hasn't had any updating done. It's a house that in its current condition

does not attract the retail side of the market. When I talk about the retail side of the

market, what I'm talking about are people that would want to live in the house, either buy

the house and live in it or rent the house and live in it.

Now, the key with thinking about the problem of a beat up house is most of the

time they are distressed enough that it's going to take thousands of dollars, several

thousands of dollars and maybe several tens of thousands of dollars, to fix the houses up

and bring them to the current retail market condition. That's the beat up house problem.

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Problem #2

The second is the beat up financing problem. What I mean by that is somebody

has bought a house. They took out a loan in 2004. It was an adjustable-rate mortgage.

The rate has now adjusted, and their payment doubled. They can no longer afford it. They

are now four months behind on their mortgage payment, and they have a problem. They

are going to lose the house to foreclosure potentially because of a financing problem.

They have gotten beaten up in their finances. The house is in great shape. They live in the

house. The house is perfect, but there is a problem with the financing.

If you step back and look at the beat up house or the beat up financing, every once

in awhile they will actually be combined, but in most cases they are separate. With a beat

up house, a lot of times you have not a whole lot of financing issues to deal with. Most of

the time there is very little owed on the properties. Most of the time you are buying

maybe directly from a bank, so what is owed is really irrelevant when it comes to what

you are willing to pay. But the condition of the house is what matters. Whereas, on the

other side, the beat up financing, most of the time you are dealing with a nicer house, but

there is some financing problem that you are trying to fix.

Another example of a financing fix would be the person that has a good job. They

work in a white collar position today, and all of a sudden their company transfers them

let's say from Denver to San Diego. And all of a sudden they try to sell their house retail.

The market has been struggling. They were not able to sell it. Now, they are living in San

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Diego. They are making two house payments or a rent payment in San Diego and a house

payment in Denver, and it is beating them up financially. That is something that you can

step in and solve when it comes to the financing.

The distressed property teleseminar series that we are going to talk about over the

course of the next four sessions we are going to focus most with the beat up house

problem, because that is happening a lot out there. I'm not going to get into the beat up

financing and start talking about technical nuances of the foreclosure investing strategies

and short sales and buying subject to and taking over debt and those types of things.

We're going to focus mostly on significantly discounted, all-cash purchases of beat up

houses.

There are two places that those types of deals primarily come from:

1) Bank-owned or REO (Real Estate Owned) properties

2) Direct Marketing.

REO Properties

With the high number of foreclosures that are occurring across the country today,

REO properties are a great source of deals. To get those good deals, it takes a little bit of

strategy, it takes a little bit of skill, it takes a little bit of patience, because it's not as

easy as just going in and saying, okay, Mr. Banker. We'd like to buy a great deal. There's

a lot of work that goes into it.

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I'll give you an example. In our wholesaling business, for some numbers to

compare, we probably make close to a hundred to a hundred and fifty offers a week. We

buy between four and five deals a week. So not too bad. Probably four to five percent, but

you can see what that strategy is. That strategy is throwing mud against the wall and

seeing what sticks. That strategy has worked very well for us. That is primarily because

when we go in and we make our offer, we make an all cash offer without contingencies

and a very short closing period, and we prove that we have the cash to close.

So that's the first way that we go after those beat up houses that are bank owned.

You can imagine how much time and energy and effort without a good system it takes to

play that game.

Direct Marketing

Now, on the other side, we do a lot of direct marketing. I love direct mail. We go

after a lot of free and clear type of properties. We go after a lot of out of state property

owners, people that own a property wherever we would like to buy it, whatever city that

is that you live in. We go after owners that don't live in that same city. Many times out of

state owners are some of the best.

Either they have owned the house for years and it's got a good chance of being

free and clear. When I say free and clear, I mean nobody owes anything against the

house. There is no loan against the house. Or again, somebody out of state. So we do a lot

of direct mail marketing type campaigns that go after those specific properties.

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In our business right now, we are closing anywhere from ten to fifteen, sometimes

more, deals a month because of those primary strategies. Marketing for great deals that

we can buy at significant discounts as well as making a lot of offers and making a lot of

strong offers and showing that we have the cash to back up what we're doing.

So that gives you kind of a picture. When I talk about controlling the wholesale

side of the distressed property investing market, those are some of the things that we do

aggressively and actively to be in that position where we are one of the folks that control

that. What you can do to be in those same positions is to apply some o f those same

principals, same strategies, build systems. You know, we do a lot of work where we

recruit. If it's a bank-owned deal, you are going to be making an offer generally through

the multiple listing services through a licensed real estate agent, and you are going to be

tying that deal up, putting it under contract in a relatively traditional sense of buying real

estate.

To do that, we have gone through a lot of efforts and steps to recruit great agents

to work on our team. We've got some specific techniques and strategies and ways that we

recruit them where we overpay our real estate agents. That's something that in our

business some people always are talking about investing in real estate and looking at

ways to shave prices and shave costs and shave this and shave that.

I believe in being fiduciarily responsible. I believe in getting the best deal for the

best price. Don't get me wrong. But I also believe in paying people well for what they do.

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In some cases that is maybe even overpaying certain people for what they do. There is a

reason you would overpay. The reason I overpay for certain aspects of the business and

the reason we structure the way we do is because I want people to be absolutely

compelled, to be captivated, to be held attentive to our business. I don't want those people

talking to anybody else. I want them to be working for us and working in our business.

So when I overpay, a lot of times it's for that reason. It is to buy loyalty. Setting

up a wholesale network and a wholesale system is buying loyalty. Another area that I do

that is as a rehabber that is buying, renovating, and selling houses. I will overpay our

construction superintendents. We will talk about the construction aspect of this business a

lot more, so I won't really get into it now, but we are overpaying our construction

superintendents. I will talk about how we get them captive to our business and how we

try to get the best quality at the cheapest price. Where we cut our prices and yet overpay

to keep their attentiveness to our project is critical.

The third area that I'll overpay as a landlord or as a buy and hold investor is on the

management. What you can see is that each area of the distressed property investing

business has a specific segment that I'm willing to overpay for, because in that specific

segment of this business there is one or a couple, but usually one primarily critical piece.

On the wholesaling side of the business it is in acquisitions. I will overpay for

acquisitions. As a rehabber, it is in construction and construction management, and I

will overpay for good attentiveness to construction quality and details and speed and

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timing. As a landlord, I will overpay to have my properties managed well. Those are the

three critical areas of this business.

If we summarize the distressed property investing business, and I'm really going

to borrow this from a friend of mine. I didn't make this up. I didn't call him and ask him if

I could say this, so I'm just going to take a gamble. Probably some of you know him out

there in the industry, so you will tell him about this tomorrow, and I'll give a phone call.

He'll say why are you stealing my good stuff, and that's okay. We'll just go with it.

There are five areas of the distressed property investing business. I love this little

acronym. I'll tell you who this is. I'm borrowing it from a friend of mine, John Fischer.

Finding, Funding, Fixing, Flipping, and Filling real estate.

Those are the five areas of the distressed property investing business that you

really, really have to focus on.

This section is really focusing on understanding the big macro-segments of this

business and then talking about the wholesale piece, the acquisitions component to the

business. Without deal flow, without great deals or access to great deals, does it really

matter what else you do in your business?

What if you spent all of your time and learned how to be an expert construction

manager? You know how to rehab a house from top to bottom at ten cents on the dollar

and do it in three days. Does that really make you money without a good deal? It doesn't.

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What is absolutely critical in this business is to have one deal stacked up behind

another stacked up behind another stacked up behind another. Without great deals you

really don't have much. Listen to me on this, because so many people spend so much

time and so much money focusing on other areas of their real estate investing business,

and they forget that without a truly good and I mean a great deal, they really don't have

anything. You can spend all the time in the world adding technical skills to your tool

chest, and if you don't have good deals, you don't have a business.

Now, the same can be said on the backside, on the exit strategy. As we talk

through finding good deals and we talk through acquisitions, the first question when it

comes to acquisitions in the distressed property investing business is asking yourself this

question:

What is my exit strategy? How am I going to get out?

If I don't know how I'm going to get out, I'm not in that good shape going in, am

I? I'm increasing my risk significantly. One of the beautiful things about investing in real

estate, when you do it right, is that your risk goes down through the floor. It doesn't

eliminate. We are still investing, and any investment has risk. But when you do this

business right, your risk goes significantly down. So the first thing you want to do when

you are looking at your acquisitions maybe as a wholesaler, or if you are buying from a

wholesaler, consider your exit strategy. How are you going to get out?

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• Are you going to flip it and sell it retail to a homeowner with a new loan?

• Are you going to sell it to another investor at a wholesale price for just a

small mark up?

• Are you going buy it and hold it for the long term wealth aspect of the

business?

Notice this, when I just talked about the single family residential buy and hold, I

didn't say buy it for the cash flow, did I? Most people think buy and hold for cash flow. I

think that's a little bit short-sighted. A lot of times it gets people into trouble.

They are taught to buy for a hundred or a two hundred dollar a month net positive

cash flow, and that makes a good real estate investment deal. Well, maybe you have a

positive cash flow for the first month and the second month, and the third month. What

happens when it goes vacant and you now have to make a thousand dollar mortgage

payment? You have just eaten up all of your actual cash flow profits.

And yes, you probably should account for vacancies going in, and that should be

part of your numbers. You should buying net of the vacancy. But in reality, who does

that? Let's be honest, people don't do that. They will justify the $100 or the $130 or the

$200 a month cash flow, and they will leave a few little things out, or they will adjust the

numbers so the Excel spreadsheet looks good, and they will make the decision to buy.

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This is not an emotional decision, it is a business. The numbers really don't lie if

you will actually let them plug in.

Where am I going with that? The cash flow side of the business is really early on

not necessarily found in the buy and hold. That's really the long term wealth building

aspect of this business. The cash flow side of the business is found in the wholesaling

front end, and it is found in the retailing side of the business as a rehabber.

Why is that? Because as a wholesaler you are getting paid $3,000, $5,000, $7,000,

$10,000 on each deal that you do. As a rehabber, retailing houses, you are probably going

to expect to reasonably make $15,000 to $20,000 to $25,000 to $30,000. A lot of times,

even in our cases, we make more than that on every deal.

Here is the key. Design your deal so that you get paid up front, in the middle,

and on the back side of every single deal. Now, that creates cash flow in the thousands

of dollars a month scenario, not the hundreds of dollars a month scenario. It is critically

important to understand that.

If you are trying to go into this business on a full-time basis and take your income

from wherever you are getting it today and bring it over here and earn it as a full-time

real estate investor, what I just said is critical. It is the most common mistake of an

investor trying to go from where they are today to that next level. They think, well, if I

buy a certain number of properties and I have a certain amount of rental income, and I

have a certain amount of X, Y, Z, that is going to set up my financial security.

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Let me tell you how I design my business from this aspect. The cash flow and the

cash that we make from wholesaling, the cash flow that we make from our rehabbing and

construction business, and the large chunks of profit cash that we make when we sell a

property to a retail buyer, all of that adds up to not only cash flow, but it adds up to

significant profit. Then, what I like to do is, from a very low risk, almost insurance

policy, set myself up for a long term retirement standpoint. I will take those profits, that

cash, and I will go pay cash for a little house forty, forty-five, fifty cents on the dollar. I

will put a little bit of money into it to fix it up where the roof is good, the plumbing is

good, the electrical is good. You know, it's a good little house, a good little property. It's

safe; it's clean. But I don't owe anything on it. I park my money in that house for the long

term wealth building.

What do I have? I have fifty percent equity, maybe forty percent equity right off

the bat if I bought it cheap enough. I have instantly nine hundred do probably eleven

hundred or even more cash flow. And now I can buy just a couple of properties like that,

and pretty soon I can have $5,000, $6,000, $10,000, $12,000 a month cash flow, not a

$100, $200 a month cash flow.

It's critically important to figure out that aspect of this business. Exit strategy first

and why and how are we getting paid from an exit strategy standpoint.

The next aspect of acquisitions is in understanding neighborhood selection,

reading the comps, and letting the comps show you what your exit strategy is. This is

something that we are going to cover on the next session in depth. We are going to break

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apart exactly how to use comparables, exactly how to use market research and market

information to show you what exit strategy is actually going to work. From a marketing

standpoint and a submitting offers standpoint, we have two components to acquisitions.

We are going to come back to that neighborhood selection in a few more minutes.

From a marketing standpoint in acquisitions, we have the incoming marketing

based on however we are putting our information out there and letting people know that

we are a buyer in the marketplace. We have incoming leads and a system that allows us

to manage that whole process from websites to phone systems to deal evaluation sheets to

the whole process. We have a deal board in our office that is, I think it's somewhere like

seventeen steps that each deal goes through to take us from acquisitions to closing. There

is a lot to what we do when a deal comes in.

The other aspect of acquisitions then is submitting offers. It is the outgoing side of

our acquisition. So we have incoming and we have outgoing that are both critical. That's

the finding good deals, finding great deals side of , remember what I borrowed from my

friend, the Find, Fund, Fix, Flip, and Fill strategy of the distressed property investing

business.

The next part of it is funding your deals. I am going to talk about something that,

most people know that I'm a huge proponent of private money. I have bought more real

estate in the last three years than I bought in the seven years of my time in this business

prior to that. I have been in the business about ten years total, and in the first seven years

I did not buy as many houses as I bought in the last three years.

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Here is the key. In the last three years I have not personally guaranteed a bank

loan. Now, that is critical, because that right there is what has allowed me to scale my

ability to buy to a different level. If you limit your potential in the distressed property

investing business, the real estate investing business, to your ability to personally

guarantee and personally finance real estate, you are going to hit a cap. There are very

few exceptions out there in the world that are not going to hit a cap at some point if that is

the strategy.

The first aspect of financing, the funding, the purchase side of this business is

traditional financing. It is what most real estate investors go after. Remember when we

talked about finding deals. Most real estate investors, especially first getting into the

business, before they realize that there is this entire, if you will, subculture of real estate

investing that is out there that the retail world sitting there watching the six o'clock news

does not know even exists. It is this subculture of finding great deals.

The same thing is in the funding aspect of this business. Where most people go

right out of the shoots is after traditional financing. It's the cheapest money; it's the

hardest to get; it has the longest term loans available, up to a thirty year fixed-rate loan;

but you are going to get capped, and you are going to get capped fairly quickly. If you

haven't made good buying decisions, the banks can really hold your feet to the fire. You

can find yourself in somewhat of a precarious situation. When we get to the fifth aspect

of funding deals, you are going to see how that can swing dramatically.

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Traditional financing is the first piece. People are historically taught look for the

cheapest loan, look for the best rate, go after that quarter point, get your broker to shave

off a little bit more for you here and there and really go after that. You know what? Okay.

That's fine. But I will be the first to tell you that if that was how I approached my

business, I would be significantly limited on what I can do.

The second, and I want you to think about what I'm talking about here in almost a

left to right scenario, the first, all the way on the left, being traditional financing. The

second is really rehab or bridge type of loans. They are a bit more expensive than a

traditional loan. They are slightly easier to get. They are usually mid-term length loans. I

would even wager to say it's still on the short-term side of the business. Generally, your

terms might be six months to two years for a rehab or a bridge type of a loan.

When I talk about them being slightly easier to get, a lot of times bridge lenders

are not traditional banks. They don't have bank charters. They don't have federal

regulations that they have to follow. They are private investment groups that have private

funds that have flexibility in how they underwrite the loan. They have the ability to say,

for example, you have a stock account that has $72,000 in it. Well, they can take that

$72,000, and let's say it's a two year loan. They might break that $72,000 up over twenty-

four months. If I'm doing the math right, they might apply an additional $3,000 a month

to your qualification. That's just one example that I've seen them do, but they have the

flexibility to kind of make up the rules along the way based on your credit worthiness and

your asset positions. You know, what kind of assets do you have coming in?

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The third part, the third step from left to right, is hard money. It's quite a bit more

expensive. It's easier to get than the first two that we talked about. They are generally

short-term loans of six months or less. A lot of times, hard money lenders will allow you

to have the option to extend beyond six months, but it's going to cost you. In a lot of

cases, it's going to cost you pretty big money.

Here's the thing, though. Hard money, you know, it's not really about the cost of

the money. If you think about it, it's about the availability of the cash. If you are buying at

forty, forty-five, fifty, fifty-five cents on the dollar, and the hard money lender is going to

put up the money for you to buy and actually help you put up the money for the repair

estimates and all these things, is it reasonable for the risk and the management that the

hard money lender has to go through to do that safely on their side that they get paid

pretty well? They've got the money. They should get paid pretty well. If that helps you

get into a deal, if that helps you get a deal fixed up, and if that helps you get a deal back

on the market and resold, isn't that a fair deal?

Maybe your profits are a little bit less than what they would have been without

hard money, but guess what? A little bit of something is more than a lot of nothing. Just

keep that in mind when you are looking at the cost of the money. It's not the cost of the

money that is important. It's the availability of the funds.

The fourth part of the funding equation in the distressed property business is flash

cash. You know, this is really an extremely short-term loan. Usually it's a twenty-four to

seventy-two hour loan. I didn't say day. I didn't say month. A twenty-four to seventy-two

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hour loan. They feel expensive when you think of how short a time their money is out

there and how really safe a flash cash lender's money is, but it is a tool that we have to

know exists and we have to be able to use when we need it.

I used flash cash just this last week from one of my private lenders. I have a

partnership set up with one of my private lenders. We have a significant bank account,

and we were doing a deal where we needed to flash cash a short-term loan. What I mean

by flash is think about a flash bulb. It just flashes, and then it disappears. Well, that's kind

of what happens with flash cash. The money just kind of appears out of nowhere. It helps

you get the deal done. It helps you take that picture. You know, like the flash bulb of a

camera. And then it disappears. Well, when it disappears, it disappears fatter than when it

came in.

So it happens really quickly, really short-term. We did a deal last week where we

were buying about a $220,000 house when it's all fixed up. We were buying it for

$95,000. We needed, just the way we were moving the property into our retailing fix and

flip company, we had to close two days quicker than we had funds available with that

particular company. So we brought in flash cash from one of our other private lender

sources within our organization on the wholesaling side of our company, and we closed

for $95,000. The money was out there for about two and a half days, and when we paid

the loan back, we paid $97,000 back. So the money was out there, and they earned a little

over two points for two and a half days worth of the money being out there. Not a bad

return when you annualize it and when you really look at the numbers.

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The key is, if you are going to annualize it, if you are going to look at the business

of flash cash. Hey, flash cash. That sounds like a great business. The key there is you've

got to always have your money rolling to the next deal. Otherwise, $2,000 for two days

sounds like a lot of money, but if you only do it twice a year, you really haven't made that

much. You have to make it a business in order for flash cash to be significantly profitable

for you.

Moving to the last piece. You know, the first three, traditional financing, rehab

bridge loans, and hard money, those are loans that you get into when you buy the

property, and you hold them usually through a certain period of time. So they are kind of

buy, fix, and flip or buy and hold types of loans. I don't really look at flash cash as being

kind of a long-term loan, if you will. I look at it really more from the aspect of it being a

tool that you can use to help you get something done in your business.

The fifth one, sliding all the way over is private money. Now, private money is

the sweet spot of my business. If I want to think back and think about what it is that took

us from where we were to where we are today, it's figuring out acquisitions wholesaling,

rehabbing and retailing, and buying and hold landlording as the three major components.

Really getting good at acquisitions and creating great deals and getting excellent at

raising private money.

Private money can take a lot of different shapes and sizes. In the distressed

property investing business we have two ways that we are usually making our offers to

solve distressed seller problems. We are either making all cash offers at significantly

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discounted prices, or we are making terms offers that probably get closer to the seller's

asking price, but we gain greater flexibility in how they get their money.

See, there is the key. All cash comes really fast, but at a significant discount.

Whereas, a terms deal can get closer to the seller's asking price. Not as significant of a

discount, but we always ask for something if we give something. So if we give in price,

we are going to ask for terms.

When we get to the private money side, one of the first areas that private money

can come from is from sellers. You would be amazed at what you might get if you ask.

I've done a lot of terms-type deals where the private money came from the distressed

seller. They were distressed over the beat up house. They weren't financially distressed.

They just didn't know what to do with it or how to deal with it or, quite frankly, didn't

want to. So we used private money from a distressed seller, and we structured it in a

variety of different ways.

There are really three other forms that private money takes. Private money takes

on the look and feel of:

1) Private Debt

2) Private Equity

3) Notes and Deeds of Trust.

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So when we look at the four aspects of private money, they can range from being

moderately inexpensive money all the way up to being pretty expensive to the point

giving away a good portion of your profits. Now, if you are going to give away a good

portion of your profits when you raise private money, what I suggest you do is if you

give, make sure you get something in return.

I will give you a classic example. I am closing on another property next week

with a private lender that I have used for a long time. We've got a great relationship. He

will always do a deal with me. He trusts me. I trust him. If he says the money is going to

be there, I know it's going to be there. It's a great scenario. Usually I will pay him about

twelve percent on his money for the duration of time that I have it out there. Then, my

goal is to keep his money out there as much as possible.

His going rate, and this might sound funny, but he is probably one of my

moderately expensive lenders. He is probably right in the middle at twelve percent. I

know people always tell you and teach that you can get ten percent private money, you

can get eight percent private money. You know what? You can. It's a lot harder. I make

enough money by paying twelve and thirteen and fourteen and fifteen percent, or even a

portion of the profits, that I really don't worry about it.

Here's what he said. I said, here's how we are going to do this deal. Our standard

terms. Yadda, yadda, yadda, twelve percent. He comes back, and he says, you know

what, Rob? For some reason I'm just not thinking that twelve percent is getting me too

excited on this particular deal.

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Here's what happened. He saw how much money we were making doing some of

the other deals, and he thought, maybe I can get a little slice of the pie. And so I asked

him. Actually, what I did is I coughed into the phone, and I choked, and I grabbed my

throat, and I grabbed my chest, and I said, you know, you are killing me. You're telling

me twelve percent isn't good enough?

At the end of the day I asked him. I said, well, let me ask you, in this particular

case what does get you excited enough to do this deal? He thought about it for a minute,

and he came back, and he said, you know, I'm thinking on this one maybe fifteen percent.

I did some quick math using a calculator, and I realized that the difference that I

was talking about on the size of this particular loan over the course of the term that this

loan was going to exist was going to be around $600. So twelve percent or fifteen

percent, and he was going to make an extra $600. Now, this particular deal I was looking

at making close to $50,000. So was I going to bicker with him over $600 to get this deal

done or not get this deal done? No. I wasn't going to bicker with him at all.

Here's what I did do. We changed up our traditional deal a little bit. Where

traditionally I would pay him, usually what I would do is I would accrue the money for

about three months, and then after three months I would start making payments to him on

the money if I hadn't gotten the house re-sold. Three to four months. Well, I just changed

up the terms. I said, look, I think I can get closer to your asking price on this particular

deal if you can be a little bit more flexible on how I get the payments to you.

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So what I did is I basically bought terms for $600, and I won't go into all of the

details, but essentially I can never be in default, and I can never have negative cash flow,

and he absolutely loves the deal. We will probably use this scenario on future deals again,

which quite frankly I like a lot better. If I am staring down month four, and on a $100,000

loan I'm looking at a twelve percent interest rate, I'm looking at a $1,000 payment to my

lender. I am more than willing to pay a little bit extra and never stare down the barrel of

that negative cash flow. For $600 I bought terms with my private lender.

Here's what's critical. With the first four forms of funding for financing,

traditional, rehab bridge loans, hard money, and flash cash, the lender is setting the terms.

The lender is in the business of lending money, and they are setting the terms on how the

loan is going to be done, structured, charged all of that.

When you get to private money, the role reverses. You as the investor set the

terms. That is a critically distinct place for a real estate investor that focuses on raising

private money to be.

That's why I like it. That's why I like it so much, because I set the terms.

Sometimes I may have to negotiate the terms a little bit, and sometimes I don't just say,

well, here's how it's going to be, and there is no discussion, and I don't want to hear it. I

don't do that. That's poor business. I'll listen, and if I give something I always try to get

something in return. It's Negotiating 101. That's what's beautiful about private money.

Here's what we are going to do. We've touched on the macro aspects of the

distressed property investing business. We've talked about wholesaling, retailing, and

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landlording and how those fit in to the big picture of your business plan. We've talked

about how cash flow is critically important in your business, and it does not come from

what most people teach. It does not come from buying and holding real estate, at least in

the earlier stages. Long-term wealth when either the properties are purchased and bought

for cash, or when loans are significantly paid down and you are just going on auto pilot,

then I will agree with it. Then I will agree that long term wealth building component does

become your cash flow. But when you are starting out, when you are operating your

business in the distressed property market, the key is structuring your deals to create that

consistent thousands of dollars a month cash flow instead of hundreds of dollars a month

cash flow.

We also talked about the financing aspects and the five different components.

Here is what we're going to do next session. Next session we are going to jump

into the fixing side of the business, and we are going to talk about neighborhood

selection. We are going to focus on reading comps to pre-select your exit strategy. This is

one of the most critical aspects of the distressed property business, because it's really

what makes or breaks your profit.

Let me explain it really quick. If the comps, the neighborhood activity, the

information that you find as you dissect a particular area has rental exit strategy written

all over it, if that is what your research shows you, then don't think you are going to flip

the particular deal.

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What I am going to do is I'm going to break apart the different pricing segments

of the market. I'm going to show you how I read comps and what ratios I actual use for

the different parts of the comparable report. A lot of people look at solds, and that's great,

but that is one minute fraction of actually reading comps and actually knowing your

market. If you can figure out the other pieces of the puzzle, you are going to be light

years ahead of most other real estate investors. Frankly, you will be light years ahead of

most real estate agents, because you are going to look at your comps, at your market

research, at your neighborhood selection from a completely different perspective. It is

from a very accurate perspective that is going to show you clearly exit strategy.

This wraps up the first section of our distressed property investing teleseminar

series. We've got some great information next session. I hope you got some great

information. The information that we talked about tonight was transformational for my

business to go from where it was when I started to where we are today.

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Training Session Two

Last session, we broke apart the distressed property business from sort of a macro

standpoint. We stood back. We looked at it and said, okay, as real estate investors how do

we look at this business and begin to dissect it, break it down into small, manageable

pieces that we can essentially handle?

One of the biggest challenges that real estate investors inevitably have, and I

remember ten years ago when I got into this business having the same issues, if you will,

that I hear other investors struggling with today. That is: where do I start?

There are so many strategies; there are so many options; there are so many ways

to make money; there is so much to this business. How do you simplify it and get it down

to something that you can actually say, okay, I know when I wake up on Monday

morning exactly what I need to go do? Or Wednesday morning, or pick a day of the

week. The goal is to know what you need to do to make money as a real estate investor in

the distressed property business every day of the week.

So if we think back to last session, we laid out the simple real estate investing

business plan. That is, and we won't rehash the last session, but we are going to refresh a

little bit, because it is going to set up some of the context and some of the concepts that

we're going to talk about in this session.

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In this session, we are going to spend the majority of our time talking about

reading the market.

• Neighborhood selection.

• Letting comparables and market activity point you to an exit strategy.

One of the biggest challenges that real estate investors have is they choose an exit

strategy of their own free will. Really, that's the wrong way to go about this business.

What you have to do is you have to let the market dictate your exit strategy, and you have

to structure the deal in accordance with the market. Think about that. If you think about

what I just said, rather than you picking the exit strategy that you want, you need to let

the market dictate the exit strategy that's going to work.

Now, in order to do that, you have to be able to read the market. You have to be

able to pick and select where you invest. What you can do is if you pick a certain desired

exit strategy then you have to select certain neighborhoods or certain areas to invest in

that the market actually works for those types of exit strategies.

If we go back to our last session, and we talk about the real estate investing or the

distressed property investing business plan:

• Wholesale

• Retail

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• Hold

Those are three exit strategies, really what I just defined. Wholesaling, either

you've just flipped the deal very quickly with really none of your own money and none of

your own risk to another investor, usually a rehabber. Retailing, you actually buy and

close on the property, fix it up, and sell it to a homeowner that gets a new loan. And hold

you become a landlord. You buy it. You fix it up to a rental grade quality, and then you

hold it long-term for the residual cash flow and the long-term wealth building. That's a

distinction that we touched on in the last session, as well.

You don't buy and hold single family homes for the individual monthly cash flow.

In most cases, you buy it for the long-term wealth building component. We went into

much more detail on that last session.

Don't Overcomplicate It

Here is what I want to say in this session as we kind of kick this off. Don't

overcomplicate the business. I cannot stress that enough. I did that when I started

investing. I thought, you know, I read all the books. I went to all the seminars. I went to

all the events. I was out there, and I was working it, and I overcomplicated this business.

We have all done it. We have thought, you know, there must be some secret to

being successful as a real estate investor. We think there has got to be something that

we're missing if we are not at the level that we would like to be at.

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There are little technical nuances. There are little skills that you will pick up.

There are a lot of little pieces that you will put together that will make this business tick.

The key is you don't have to make it overly complicated. It is really a fairly simple

business. A lot of times, this over-complication is really what becomes the stumbling

block to a lot of investors or even would-be investors. They get the education; they are

ready to act; they put some things together; they've got some skills; and at the last minute,

before they pull the trigger, they begin to second guess. They begin to generally

overcomplicate every little piece of the business.

So if I can stress one thing in this session, because we are going to be talking

about a subject that is by and large relatively complicated. It's not a simple part of the

business to read the market and use neighborhood selection and understand exit strategy.

It comes with some experience. It comes with some trial and error. It comes with testing

some things. Especially when you are early on in your real estate investing career, and

you are trying to read a market, and you don't have hundreds of deals and hundreds of

properties that you have evaluated under your belt, it still can be complicated and

confusing.

As you develop the skills, and as you gain some more experience, you will get to

a point where it becomes much easier and much quicker to actually look at the comps,

look at the deal, and make a quick decision on what this deal is all about. You know, how

this is really going to work. What I want you to do is not get lost in the minute details.

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Take some good notes or highlight some key passages here, because we are going to talk

about some very specific aspects of market selection.

Exit Strategy Options

If we think about our real estate investing business plan, and if we think of every

deal moving form the left side of the factory through the conveyor belt out the right side

of the factory that is our goal. Every single property that we evaluate is moving into the

left side of the factory. As we evaluate it, close on it, fix it up, hold it or flip it or market

it for resale, it's in the factory. It's going through this little churning process. Then, it

comes out the right side, and it is either sold or it's rented. So that is the process in its

simplest form, moving from wholesale to retail to hold as our exit strategies.

Now the exit strategy options. As a wholesaler, what you are looking to do is sell

very quickly to another investor. Here's what is important as a wholesaler. You need to

know market and neighborhood selection and be able to read opportunities, because if

you are a wholesaler, your buyers are other real estate investors, and other real estate

investors are going to generally do one of two things. They are either going to flip the

property (buy it, renovate it, and sell it retail to a new homeowner), or they are going to

hold it long term as an income producing, wealth building long-term property. As a

wholesaler, you need to be able to look at markets, comps, and neighborhood selection,

and say what is a viable exit strategy in this area.

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All too often I see wholesalers that promote or pitch or try to sell a deal to another

investor. And a lot of times they have been taught to give some exit strategy options. So

under the exit strategy they will put flip, hold, lease option. You know, they will put

everything under the sun. A lot of times when you kind of dig down into the deal, let's

assume that the wholesaler first of all knows what they're doing, and they have a good

deal. Then, usually if they have a good deal, it's based on price or based on terms, as we

talked about in another session. If they do have a good deal based on price or terms, a lot

of times they have maybe set up and understand the exit strategy part, but not always.

So understanding exit strategy is key. It is the number one piece to market

selection, because if you want to hold or if you want to flip, or if you want to retail

houses, you need to pick the right areas.

The viability of that exit strategy then is really read by the market and by what is

happening. I'll give you an example. We do a lot of transactions through out business. We

buy and sell a lot of houses. We wholesale a lot of houses; we buy, renovate a lot of

houses; and we buy and hold a few house. A buy and hold strategy is not a huge strategy

for us at this juncture of the game. Most of what we do we retail or we resell it quickly to

recycle the capital. That is just a function of how our business is set up and what we are

trying to accomplish in our business at this stage of the game. That will change over time,

but right now our business is set up on a primarily retail type of a model.

That being said, I am going to give you an example of a property that was

purchased recently. The comparables in the area put the house in a fixed up condition.

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When we bought the house, I looked at the comps, and I was pretty comfortable that the

house would sell within thirty to sixty days for about $119,000 or $120,000.

Now, I had sold comps within ninety days to justify that price. I had decent

market activity. I had everything to suggest that my decision was correct. We bought the

house for $52,000, and we only put $20,000 or so into it. So we are into it right. You

know, we bought it for $52,000, we're $20,000 in for the fix up, so we're all in at $72,000

plus closing costs. Let's say our all-in cost is about $73,000. Not a bad deal!

We figured that we would sell it for about $120,000. After our cost of sale and

after we paid real estate commissions and closing costs and probably some down

payment assistance or concessions, we were probably going to net somewhere in the

neighborhood of $104,000 or $103,000. Probably about a $30,000 profit on that deal. Not

a bad little deal. I mean, if you look at that from a cash on cash standpoint, we invested,

all of our money in was about $73,000, and we were going to make about $30,000 in net

profit. Now, that is pretty good. That's a little less than 50% cash on cash return.

You annualize that, even if we didn't leverage our money at all, if we just paid

cash, which is what we do most of the time without any leverage, our annualized return

on investment is huge. It's fantastic. Now, that's what it said on paper. That's what it said

based on the comps. That's what I was comfortable with.

What do you think happened?

We actually had to keep lowering our price because of a variety of things

happening:

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• Financing programs were changing.

• Market comparables were changing.

• The way appraisals were done was changing.

There was a turbulent time through the real estate market, the financial markets,

the mortgage markets. You know, and we are still in that time. But things were changing,

and we had to keep reacting to those changes. I will say reacting, but what I try to do is I

try to be proactive. I try to attack real estate, and I try to attack all of the deals that we do

rather than play defensively and sit back and wait for things to happen. We try to be

proactive on everything that we do.

We ended up finally going under contract for this house for a little over $100,000.

$102,000 was our sales price in the contract. To get that, think about that. That is a

$17,000 reduction off of what we originally thought we were going to make on that deal

or what we would sell it for.

Now, on top of that I offered a $2,500 agent bonus, I had to put a plasma TV in

the house, and I had to pay 3% in buyer concessions, which wasn't bad. You know,

sometimes you have to pay up to 6%, depending on the programs. But if you start to look

at the numbers, all of a sudden things got whittled away very quickly, where a great profit

on paper flip ended up being marginal at best.

Did we lose money? No.

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Where I got to was, look, we do enough deals. We buy ten to twelve to fifteen or

more a month. Do I need to hit a homerun on every deal? Sometimes I'm better off

attacking the market, aggressively pricing something and moving it so that I can turn my

capital again and again and again. I'm better doing that than I am sitting and waiting for

something to happen.

At the end of the day, we will make around $10,000 on this little flip. From

$30,000 in projections to an actual earned of about $10,000. A significant difference from

what our paper said and our evaluation and everything said up front, nonetheless

profitable. But you can now see why it's so critical to buy right up front. You have to buy

in the wholesale side of the market.

Where Do You Sit in the Food Chain?

As a real estate investor, you have to think through your exit strategy, and you

have to think through your buying model, your pricing model. What I mean by that is for

every position you are in the model, if you are a wholesaler, if you are a retailer, or if you

are a buy and hold guy, you have to buy cheaper than that pricing segment.

Here's what I mean. If you are a wholesaler, you have to buy below wholesale

prices. You have to buy the cheapest of any real estate investor out there.

Why?

Because you are going to typically mark that deal up a few thousand dollars,

$5,000, $7,000, $10,000, and you are going to sell it to a retailer. A retailer is going to

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pay wholesale. So if you are a wholesaler, you have to buy below wholesale. If you are a

retailer, you are going to pay wholesale.

Now, if you are a buy and hold guy, oftentimes what you will do is justify your

numbers and maybe pay slightly above a retailer's wholesale price. It's still well-below

retail market pricing, but you are usually able to justify a little bit higher price.

Why is that?

It is because you are not trying to turn and reap a quick flip profit on that deal.

Your goal is to cover your debt service, be positive cash flow, and hold long term through

the ups and downs of the cycle for the long-term wealth building component of real

estate. Because long-term real estate has a proven track record of always going up.

In the short run, as we see right now in the year 2007 and 2008, we have watched

real estate go down. It goes down in a segment or a season of time, and it will go back up

eventually, based on simple economic supply and demand.

Where do you fall in the food chain as a real estate investor? A wholesaler, a

retailer, or a buy and hold guy? What you define yourself as and where you fall in that

food chain helps you in your quest to pick the right neighborhoods and select where you

want to be and what you want to do.

Here's what I want to do first. I want to kind of break apart the pricing segments

that each area goes through. We can talk about a metropolitan area. We can talk about a

zip code. We can talk about a sub area. We can talk about down to a neighborhood

level. In each one of those areas, from the biggest down to the smallest, the neighborhood

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being the smallest area that you would evaluate and buy in, there are three very distinct

pricing segments.

Three Pricing Segments

The most expensive, the highest priced real estate at a neighborhood level is what

I like to call the investor's retail level. That is the fixed-up house, fixed up to 2008,

whatever year we are in, fixed up to this year's current standard. An investor retail priced

house is the top of the market. It is fixed up from head to toe, from roof to foundation.

Everything has been gone through. Everything has been fixed up. Everything is clean,

crisp, nice, new, in-style. It's the highest price.

Below the investor retail price, and think about this now. Step back and think

about what I'm talking about. Pick your favorite neighborhood, not a big area, not a

whole metro area, not the whole city that you live in. Pick your neighborhood. Think of

your favorite neighborhood. Visualize the houses that are in that area, because that is

going to help you understand what I'm talking about. This is relevant when we come back

and we start to read the comps. We have to understand these three pricing segments.

So the top of the neighborhood pricing is the investor retail pricing. Below the

investor retail pricing is the homeowner retail pricing. Here is what the homeowner

retail pricing is. The homeowner retail pricing is I own the house; I live in the house; I

would like to sell the house; maybe even I have to sell the house; and I've done enough

fix up that I think I'm going to be able to sell the house. But I have not gone through from

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top to bottom and re-done everything. There is still a lived-in look and feel. There is still

a somewhat aged look and feel in most cases in the homeowner retail pricing segment of

the market.

The key here is that usually because they are not fixed up to the same level that an

investor's retail house would be fixed up, they are priced a little bit lower. Now, it is not

always the case. Sometimes, you know, and you have to think about the psychology here.

A lot of times, number one, people are proud of their houses. They think they are worth

more than they usually are. You know, if you are not in tune with what your market has

been doing, you thought it was worth something in 2005, and there is no way you could

imagine that it's worth $50,000 less today. You've got a strong personality, and you run

over the real estate agent that is going to list your house, and you demand that if they give

you the listing, they have got to price it the way you, as the homeowner, want.

That happens more often than not. So you do find sometimes homeowner retail

level pricing priced at the top of the market. But step back and think about it. Usually, it's

the investor fixed-up retail houses at the top, the homeowner houses in the middle, and

way below, and we are not talking below. We are talking down in the dump, down in the

very bottom of the barrel. You have the third pricing segment in every neighborhood, and

it's the investor wholesale pricing. We are talking a big spread from homeowner retail

down to the investor wholesale.

Here is what typically happens and what can be challenging. If there is a

neighborhood that has a lot of abandoned or boarded up or distressed houses, a high

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foreclosure, heavy short sale type of an area, you can see a lot of investor wholesale

pricing in that area. That hurts the overall value of a neighborhood.

On the other hand, you might have just a few houses here and there that are priced

down at the investor wholesale side of the market. So it becomes hard sometimes to read

the comps, because you will look at a comp sheet, a CMA, a Comparative Market

Analysis that a real estate agent might give you. And you are going to look at it, and you

are going to say, wait a minute. What's going on? We've got, things are priced

everywhere from $72,000 on up to $139,000, and it's the exact same house. You have to

step back and you have to say, okay, $139,000. Read the market notes that go along with

that particular house. Listed for $139,000. Brand new, remodel, top to bottom, cute

bungalow, 2008 stainless steel appliances, granite countertops. It's a fixed-up investor

retail house.

The house that is $117,900 in the same neighborhood, same house, same

everything says pride of ownership, cute house, must see. That is telling you in the notes

that particular house is not at the top. It has not been totally remodeled and fixed up. It is

probably being lived in by a homeowner right now. You know, it is falling in that middle

range of the market.

Then, you look at another one that says it's on the market, and now we are talking

about using the MLS here, just seeing what is available in certain neighborhoods and

areas. A Multiple Listing Service which real estate agents access. That's where we're

getting these prices to get a snapshot. Because remember, the key is it doesn't matter what

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somebody is asking for their house. It only matters what you'll pay. You have to

remember that. It doesn't matter what they're asking. It only matters what you'll pay.

So what we're using these numbers for right now is to give us a glimpse and a look into a

certain market, into a certain neighborhood.

So let's say there is another house that's listed for $101,000, and in the notes

section it says bank owned, corporate owned, vacant, addendums required. You know, it

is telling you that it is a distressed property. It is on the distressed wholesale side of the

market. And there is then another one that is priced even down lower at $72,000, the

bottom end of the pricing market that we talked about. So there is one of two things

happening there. The one that is listed at $101,000 is either in significantly better shape

than the one listed at $72,000, or the bank that owns or the seller that owns the one at

$101,000 hasn't had reality hit them quite yet, and they haven't dropped their priced

down.

Take a Step Back

It doesn't matter what that pricing spread is. This is where you don't want to get

lost in complication. This is where you have to step back and say, okay, wait a minute.

He is talking a whole bunch of numbers. Rob, you are throwing a bunch of stuff out here

at me. I'm getting confused. This is where you have to step back and look at it and say

what am I trying to learn at this particular stage? You are simply learning right now that

there are three very distinct pricing segments in every neighborhood. Whether they are

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always prevalent and always there, they are not always there. You won't go into every

neighborhood on every single day and find all three of these pricing segments. But over

time, at different times, and in certain neighborhoods, all three of them are always there,

and in certain neighborhoods, they are there more often than not.

Where are we going with this once we understand the three basic pricing

segments of a market?

Well, let me give you a little side note tip. If you are sitting back and looking at a

certain neighborhood or a certain market, maybe not even a neighborhood. Maybe you

are looking at a metropolitan area, let's say. You are trying to figure out, okay, Denver is

a big city. It's kind of a big little city, right? A couple million people. If you have been

here for any length of time, you know, I've been here for about fifteen years and invested

here for the last ten years. It ends up being a pretty small city. But if you are starting out,

and you don't know where you should focus some of your buying efforts and where you

should try to invest in real estate, it can be overwhelming. There are a lot of options.

One of the tools that I like to use for neighborhood selection is a software

program called MapPoint. It's really simple. It's a mapping program that you can buy

from Microsoft. It's different than Streets & Trips. We're not talking about Streets &

Trips software. We're talking about Microsoft MapPoint, and the reason I like this

particular software is because it has certain data built into it. It's a mapping software that

allows me to either bring in and import my own data or use the data that is already built

into the site to map and represent information graphically.

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Here's what I like to do. I like to open Microsoft MapPoint, and I like to zoom in

on the metro area that I live in or want to invest in. What I do is I go to the data tab at the

top of the program, and I go to the mapping wizard. As I'm talking, I'm doing it on my

computer screen, so I can explain to you exactly what I do and how I do this. There are a

couple of little things that I do, and I had somebody show me this years ago, and I have

used it ever since, and it is really good.

So when you choose the data function at that top of the deal and you then select

the data mapping wizard, it pops up a little screen, and it gives you choose your map

type. So I always choose the shaded area, because I'm going to shade specific areas as we

move along here and set this up. So I choose the shaded area map. I click the next button.

That takes me to choose the data to map. What I do is I add demographics to the map. I

want to actually map certain demographics. So that is the first little radial button. It has

already been clicked.

I go ahead and I hit the next button and then choose the data field that I want to

display. Now, there are two things that I am going to do here. The version of MapPoint

that I have, I don't even know what version I'm working off of on this particular laptop. I

go and I map the average household income. Let's see, on some versions of MapPoint

there is a projected average household income. So let's say they might project 2010 or

2012 average household income. Or you can take the most recent year and map.

For example, the version I am looking at right now says average household

income (year 2004). Okay, so has the average household income changed from 2004 until

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today? Yes, probably a little bit. But has it changed so dramatically that it is going to

really skew how my map looks? No. It's not. So I don't worry about being perfect. I'm

just trying to get a visual representation.

So I choose average household income (2004), and then I go down, and I show

the data by. There is a little box here that says show the data by. What I do is I select the

census tract level. You can choose by state, by metropolitan area, by county, by zip

code, or by census tract. The reason I choose census tract is because it's the smallest

surface area that I can map this data at. A zip code is actually bigger than the census tract.

So I want to see as small of an area as possible if I could. If they actually tracked this data

by neighborhood, that would be great. They don't, so I take it by census tract, and it

works pretty well.

So I hit the next button, and now what it's doing is it's taking that data and it's

mapping. It's creating a map. Now, what I have to do is I have to format the map. This is

really simple. It walks you through it on a wizard. But there are a couple of things I do on

this format, the shaded map legend area.

The first thing I do is there is a little drop down that allows me to choose the color

scheme of the map that I'm working with. Now, I really don't care what you choose. I

usually tend to pick the blue, the darker the blue, the lower the average household

income. All the way to a lighter blue, to a white, which is kind of neutral. Then, up to

pink and all the way to a bright red. So I go from dark blue to bright red. That's the

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mapping color that I usually pick. So it is really easy for me to see from the cheapest,

darkest areas to the brightest red, highest income areas on a map.

After I select my mapping color, I set my data range. Here's what I do. You can

play around with this depending on what city you live in and where you are from.

Sometimes, I will have to go back and play around with it a few times. I'll have to remap

this data a few times to get it right or to get it kind of how I want it to show up. If you

think about it, as real estate investors, what are we looking for? We are generally trying

to invest on the lower priced side of a neighborhood or a certain market segment. We are

usually not trying to go in and invest in $400,000, $500,000, $600,000, $800,000 houses.

Obviously, in certain parts of the country that might be your lower median to the lower

side of the market, but not for the most part.

What I do here is I set the top end o my data range at an average income of

$100,000. So what gets pulled in automatically is $900,000. On the bottom it would be

zero. So here is what happens. If I left it the way it is, the map is going to map from dark

blue being virtually a zero household income all the way up to bright red being an

average household income in the country club areas at $900,000.

What I do is I say, am I looking for that big of a range? Is that my target

audience? The answer is usually no.

So I am going to change that $900,000 to $100,000. What this is saying is that the

average household income, not the average person's income, but the average household

income is $100,000. Like I said, you can play with that. Maybe you find that certain cities

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that you are in you need to go at $50,000, or maybe you need to go to $150,000 in order

to see the data mapped the way you want it to be seen. There is no perfectly right answer.

What this is going to do is just help you get a visual on an area very, very quickly.

So I changed the top end of my average household income to $100,000, and I hit

the finish button. So now the data is being mapped, and what is going to end up

happening is it maps the entire country. It doesn't just map Denver. So then I have to

zoom out, and I have to scroll back over and zoom back in to wherever it is that I want to

look. As I start to zoom back down in and get closer and closer and closer down to a

streets level, I can hold my curser over certain areas, and I can clearly see, let's see. I'm

looking at it right now, and between two major north and south streets with a major east

and west street on the north side I have an average household income of $36,200. On the

south side, I have an average household income of $66,072.

Very, very quickly I am getting a visual representation, and I can guarantee you

that if you went and drove that north side of the street area, the houses are going to be a

little bit more beat up. There is going to be a little bit more crime probably. The cars out

on the street are going to be a little bit less desirable. You know, it is just going to be a

lower income area. You will see it. What you will see is how nice the yards are fixed up.

You will visually see it as you go drive the streets.

So what this is doing for you is, instead of you having to go drive the streets and

take notes and say, okay, it looks like at this intersection it gets a little bit nicer, and that

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side is not so nice, or where those boundaries are. This mapping program helps you do

that very, very quickly.

One thing that you'll find is, so if I just go further to the south, then I go from kind

of a blue to a pink down to a bright red, and then a gray area. So what is this gray area?

Well, the gray area is actually a higher average household income than what I mapped. It

is actually $112,000 average household income area, but it is showing up gray, because I

limited, I stopped my mapping at $100,000.

You have to, you know, you just start to think about and say, okay, what did I do

here? All of a sudden, I can zoom in, and I can zoom out. I can say where do I want to go

focus some of my marketing efforts, some of my buying efforts, some of my acquisitions

efforts? Very quickly, I get a picture that segments the whole metropolitan area. It's a

really neat tool that honestly I use a lot.

Again, don't get lost and forget what we're trying to accomplish. What we are

trying to accomplish here is being comfortable with our exit strategy. One of the biggest

things that keeps people from pulling the trigger is the uncertainty and the fear of what if.

So we are just trying to equip you with some tools that start to help you eliminate that

uncertainty.

What if you don't have time to go drive the streets and get a sense o fit? A really

awesome tool that I love that has come into play over the last year or so, and it's not

everywhere, but it is in most major metropolitan areas, is on Google Maps there is a

Street View. So you can go to Google Maps, and they have their map, and they have I

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think it's the street view that you click on. There is a heavy blue border around most of

the streets. If you go and click inside that heavy blue border on a particular street, you

can punch in an address that you are interested in, zoom down to it, click on the street

view, and it actually allows you to walk around the street in a real 3-D picture view and

look around at the houses, at the neighborhood, at the neighbor's yard. It allows you to go

walk the street right from your office or your living room.

It's a pretty neat little tool, and it helps you once you have the MapPoint mapped

out, and you have maybe gone and kind of walked the street through your computer

screen if you haven't physically gone out there. All of a sudden, you have got a pretty

neat little view of what is functionally going on out in the neighborhood.

It's the lowest income area of everything that surrounds it, and when you go walk

the streets you can physically see that maybe down this street there are ten houses, and

three of them look like they have good pride of ownership, and the yards are kept up, and

the other seven are less than perfect. Maybe it is an indication of it being a rental house or

something like that. It just gives you an idea of the neighborhood and what is going on.

Those are two tools that you can use that are pretty good. There are a lot of them,

but again, my whole mantra in this business is to keep things relatively simply. You can

get lost, and you can have ten different website screens up all the time, and you are going

from this website to that website to this website to that website, and you are looking at all

of this data, and you are just burying yourself in information and paralyzing yourself

from actually ever taking action. So I am not going to give you anything else other than

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those two tools, because that is as much as you need to select an area and get a picture of

what is going on. It is not your final decision-maker, and we are going to get there in a

minute.

The three types of comparables that you want to look at:

1. Solds

2. Actives

3. Under Contracts

A lot of times I see people teach or tell other real estate investors or even realtors

will tell their investor clients all you need are the solds. That's what is important. I have

seen it in bold, italics, exclamation point after it. You only care about the solds. That's

wrong. You don't only care about the solds. Each segment of the comparable, the CMA,

the Comparative Market Analysis, each segment gives you a little different information.

Here's what I mean. The recently sold properties help you establish pricing.

Remember this. The solds help you establish pricing. Now, you want to look at solds

that are within the last ninety days. But what does a sold actually do? It's a rearview

mirror look at a particular market or at a particular neighborhood or at a particular type of

house. But the solds help you establish your pricing.

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Now, remember this as well. Inside your solds you have three distinct pricing

models. You have the investor retail, you have the homeowner retail, and you have the

wholesale pricing segment. Solds help you establish pricing.

A lot of times what happens is a newer investor, or even sometimes a seasoned

investor, will take those solds and they will say, well, I have a big spread. My spread

goes from $130,000 up to $170,000. What they will do is they will just average it out and

call it whatever that average is, $150,000, as their comp. Well, that might be on the more

conservative side, but I will tell you that a lot of times it will prevent you from doing a

deal. You actually have to look at it and say, okay, these solds, why do I have one at

$130,000, and why do I have one at $170,000? What pricing segment is the $130,000 in?

Oftentimes, it is going to be in the homeowner retail or some range of the wholesale

pricing.

I just said a key word. I said the word range. There is no drop dead number.

When you are pricing a house to either buy it or to resell it, there is not necessarily a drop

dead this is the number. There is usually a range that number can fall within, and it is

subjective based on what your buyer will pay. Some people like some things more than

others. So there is a range of subjectivity that goes into your comparables.

The first thing that you look at are solds, and they help you establish your pricing.

The second are the active properties, the actives. What the actives do is show you your

market competition. If there are a lot of active properties on the market, you know that

you have a lot of competition when you go to try to flip your house in that particular area.

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So what does that mean?

That means you better know that you have competition. You are not going to be

the only house on the block that is available for sale. So if your exit strategy is to be a

retailer, to flip the house, you have to know that you are going to have competition that

you are going to have to sell against. The actives show you that.

I am going to talk about some ratios here in a couple of minutes that help you read

what this all means. So the second was the active properties, the number of active

properties.

Here is the other thing, too. When we are talking about actives, if I'm looking at a

buy and hold exit strategy, or if I'm saying my plan A is to retail it to a new homeowner,

but my plan B if it doesn't sell is to rent it, I also want to look at the rental activity in an

area. So not just the for sale activity, but I like to go and get an idea of the rental activity

and what is going on. Where are my rents going to be? How much competition is there?

From a supply and demand standpoint, this begins to tell me how easy it is going to be

for me to exit and get out of the deal.

The third in your comparable property research is the under contracts. Now,

what the under contracts do is give you a current, right here, right now, today view

of the supply and demand. Here is what I mean by that. If it's under contract right now,

that means somebody was out looking for a house; they found a house; they liked the

house; they wrote an offer; the seller accepted the offer; and they are under contract. That

means there was demand for that house at that particular time.

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Now, that is just one house. What you start to do, though, is you look at it, and

you ask yourself question about the area.

• How many houses are under contract?

• How many houses are currently active and available?

• How much competition do I have?

• How many houses have recently sold?

• What pricing segment do those solds fall in?

What happens if every house that was recently sold falls in the wholesale pricing

segment? If everything falls in the wholesale pricing segment, let's say there were five

houses that sold pretty cheap in the last ninety days. There are fifteen properties that are

active on the market, and there are two under contract. What does that tell you?

It tells you that you better think twice about a retail flip strategy. Your exit

strategy is going to be a challenge if you are trying to buy, renovate, and flip that

particular house. The solds were low. Remember, solds establish your price. Actives

show you how much competition you are going to have, and there was a lot of

competition. And the under contracts give you a picture of how much demand, and there

were only a couple in the scenario we just talked about. Only a couple under contracts. It

shows you very quickly supply and demand.

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Let's look at a couple of other examples and understand and figure out what it all

means. I will be honest with you, this is one of the biggest tools or skills that you can

gain as a real estate investor. If you can figure out how to read your comps and the ratios

of your comps, it will give you so much comfort in your ability to figure out what your

exit strategy is. It will give you so much comfort in your ability to, quite frankly, be

comfortable with that exit strategy. And guess what? Everything else that we have talked

about in the distressed property investing business or as a real estate investor becomes

easier when you are more comfortable. The more confident you are, the easier your

acquisitions are, the easier it is to fund your deals and raise private money or get hard

money loans, the easier it is to choose and evaluate which deal is really a good deal, and

the easier it is to figure out how to price and move your deal on the back side.

So the more comfortable you are with reading comps and neighborhood selection,

the more successful you are going to be in this entire business, every aspect of the

business. A lot of what this business comes down to is you will find yourself in unique

situations and unique conversations at the strangest time. If you can intelligently carry on

a conversation that makes sense, is logical, and explains to whomever you are talking to

that you know this business, opportunities will come your way. People will bring you

deals. You will find money. You will have the best sales and leasing agents in town

wanting to work with you. All of these things will come into play when you can begin to

intelligently talk about all different aspects of this business.

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Let's look at another example, just so we get another thing under our belt here

before we finish this session. One of the things that real estate investors are notorious for

is they ask their real estate agent to run a CMA and give them comps. What a lot of real

estate agents do is go in and set maybe area parameters. You know, I don't want to be

west of 3300 West, and I don't want to be east of 5500 West, and I don't want to be north

of this area or south of this area. They set an area parameter.

Sometimes, they will set a square foot parameter. Other times, they will set a

number of bedrooms and bathrooms parameter. So if a house in the area doesn't have less

than three bedrooms, two bathrooms, so a four bedroom, two bath may not even show up,

because your house is a three bedroom and two bath house. They will filter out arbitrarily

properties that can tell you a lot about an area. I would encourage you that when you ask

a real estate agent to run comps for you, the person that you are working with that is

getting paid by you doing deals, and they will work for you and give you comps and help

you out. I would have them run a complete CMA. They can do both. They can do a

filtered version, and I use filtered versions all the time, because the guys that I use, they

understand this business. We've been through it a hundred times, and I trust their filtering

eye. I also know the markets in the neighborhoods that I am heavily investing in, so I

don't worry about it.

But when you are starting, when you are picking an area, have them not filter the

properties. I want you to physically go through with a highlighter and a pen and

physically filter the properties yourself. What is going to happen is you are going to see

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all of a sudden that in this area you don't have any three bedroom, two bath houses

selling. That's what yours is. You are thinking about buying a three bedroom, two bath

house, but all of a sudden you look at it and you see. Wait a minute. I've got a ton of four

bedroom, two bath houses selling. So you look at it, and you say wait a minute. Could I

add a fourth bedroom to my house and make it conform to what is really selling?

The worst thing you would want to do is just look at the three bedroom, two bath

houses, filter out the four bedrooms because that's not what you are trying to compare it

to. You would miss looking at all of this demand and all of these solds of four bedroom

houses, and you would miss the opportunity to create a higher and better use. I like to get

from one bedroom, one baths to two, ones to three, ones to four, twos, whatever. I like to

get an entire neighborhood and then begin to break it apart.

So the first thing I do is I break it into the pricing segment. When I get all of the

properties in front of me, I want to look at it and say:

• Is this an investor fixed up retail house?

• Is it a homeowner, I live in it, and I would like to sell it house?

• Is it a wholesale, distressed, investor-bought junker?

That's the first thing that I break apart is just pricing. Then, I will bucket each of

those pricing segments by themselves. Then, I will go into each of those buckets, and I

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will say, okay. Four bedrooms over here. Three bedrooms over there. With basements

over here. With garages over there. We will break that all apart.

I will begin to look in my buckets, and I'll ask myself this question:

In the last ninety days, how many solds do I have in this particular bucket

with this particular type of house?

Then, I will ask myself:

How many actives do I have (total number)?

Then, I will ask myself:

How many under contracts do I have?

What I have just done is I have segmented a neighborhood, and I will be able to

see the number of solds; it shows you pricing and the recent demand; plus, the number of

under contracts shows you current demand. I like to look at those two numbers together.

If I have a really small number of solds and under contracts and a really big number of

active properties on the market, a high supply, I start to question my exit strategy. And

then, I will look into the next bucket. I am questioning my exit strategy with a three

bedroom, two bath, but all of a sudden I look in the same neighborhood, and I look in the

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four bedroom, two bath bucket, and I've got a ton of solds, I've got a ton of under

contracts, and I've got very few actives. That shows me that I have much more demand

than I have supply.

Do you see what we're doing?

1. We are first bucketing properties into pricing segments.

2. We are segmenting them into like kind types of properties (bedrooms,

bathrooms, basement, and garage).

3. We are asking ourselves the question of supply and demand.

That shows you exit strategy, and that sets you apart from 99% of the real estate

investors out there that are stuck just looking at solds and really shooting blind. You can

figure out exactly what a market will bear and what a market will give you if you start to

look at it in this form and fashion. It is really, really powerful stuff, and I encourage you

to think about it more, research it more, look back over your notes, and really understand

what I've talked about in this session. It will change the whole way you look at doing real

estate investing and your comfort level and your confidence and your ability to select

neighborhoods.

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Training Session Three

Over the last two chapters, what we have focused on is the bones of the

real estate investing business, understanding really the inner workings of what

makes this business tick. We've talked about identifying niches, opportunities,

exit strategies, and really stepping back and looking at the real estate investing

business as a whole, complete business and breaking apart the different,

individual components that go along with making this successful.

So if we look at and if we think about and if we talk about why those

different parts are critical and why they make sense on helping us run a

successful real estate investing business, what I do is I borrow from my ten years

in this business. I think back to when I first started, and I think back to the times

when I have gone through a particular real estate investor training. I went to a

seminar; I went to a boot camp; I went to a monthly meeting at a real estate

investor's club. I did a variety of different things, and I remember walking out, and

I remember thinking what do I do next? Over the years, that "what do I do next"

became more and more clear.

In the last two chapters we have talked about a lot of the different

components and the pieces and the parts of the business, and you have heard

me say it in other sessions. I will say it again. If you don't have great deals

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coming into your real estate investing business, you don't have a real estate

investing business. It's as simple as that. Everything that we do as a real estate

investor starts with not just finding deals but then actually negotiating and getting

those deals under contract so that we can use some method of disposing or

selling that property for profit. The key is: finding deals is the starting point of

your real estate investing business.

Now, there are a lot of different ways that people go about finding deals,

and what I want to do is I want you to take out a pen and a piece of paper. I want

you to draw a triangle.

At the top of the triangle I want you to draw an arrow into the top of the

triangle. So really from the top of the page right down to the point, and I want you

to put an arrow down and right at the point of the tip of the triangle. I want you to

write "great deals" at the top of that arrow.

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So what you need to do is you need to fill your real estate investing

business with great deals. I'm going to focus in this chapter and talk about this

real estate investing triangle, because all of the other technical skills that we've

talked about and mentioned in the past in other sessions all feed into this simple,

little concept.

We draw the triangle, and at the top of the triangle we have great deals.

Now, on the left, on the point of the triangle off to the left, I want you to do a

similar thing. I want you to draw an arrow into the point of the triangle on the left

hand side. So it would be the lower left as you are staring at your triangle. I want

you to write "money," financing, funding. So at the top you've got great deals; at

the lower left you have money, and on the right hand side, the lower right hand

side as you look at your piece of paper I want you to do the same thing. I want

you to draw an arrow into the point of the triangle, and I want you to write

"resources and your network." These are the three critical points of any

successful real estate investing business, period. These are the three things that

will make or break your business.

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Now, we are going to talk about why and how and what all that looks like

and how that works over the course of this chapter. But there you have it, folks.

There is the real estate investing business. If you step back and test everything

you do in your business against those three points on the triangle, I guarantee

your success.

Did you get that?

If you step back and test your real estate investing business against those

three points on the real estate investing triangle, I guarantee your success.

Let's talk about it for a minute. Let's talk about the systems of a

successful real estate investing business. In all of these systems you have to

GREAT DEALS

MONEY RESOURCES &

YOUR NETWORK

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have an element of management skill. You have to be a decent-enough

manager, or you have to build processes that help you compensate for your

shortfalls. You either have to be a good manager and have the ability to manage

everything that goes on in this business, or if you are not a good manager, you

have to build processes that force things to happen through a certain set order.

That really goes for any business that you might be involved in. Processes

are absolutely key to long-term success. Here is the key, as you grow in your real

estate investing business, as you start to do more deals, as you start to make

more money, as things get bigger, it's going to require more people. As your

business requires more people, systems and processes are more critical.

Let's talk about the five major systems that any successful real estate

investing business has to have.

System #1: Acquisition System

You've got to have a good acquisition system. Your acquisition system is

really your marketing, your people, your staff, your bird dogs, your network, and

your other wholesalers. It's a series of people and/or things, your network out

there, that helps build your acquisition system. You have to be buying deals all

the time.

When I say buying deals, what do I mean? I really mean you have to have

a good, constant flow of deals coming into your pipeline that you have the option

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to put under contract. In real estate, if you go under contract with a great deal,

you've got the ability to make money.

I'm going to give you a good example of one that happened just today in

our business. This particular house is about a block and a half or so off of a really

desirable park in the Denver metropolitan area. It's a great house in a great

neighborhood that, when it's fixed up, it will sell for about $210,000 all day long. It

might even sell for a little more, but let's be conservative, and let's say $210,000

all day long.

Now, the $210,000 is a really quick sales price. Okay. So we are talking

about this deal that will sell for $210,000 all day long, and when I say that, what I

mean is it will sell for $210,000 in literally thirty days or less very comfortably.

In our last session, we talked about reading comps, understanding the

market, and the three different pricing segments, and three different types of

comparables that we would look at to come up with that conclusion. The filtering

process, the evaluation process that we went through last chapter is exactly how

we came up to our $210,000 price.

The house, my acquisitions manager and my construction superintendent

have walked through the house. They've looked at it. They've got a good sense

of what it is going to take to get the house fixed up and in a $210,000 condition.

Our construction budget is about $25,000 all in. We are buying the house for

$119,900. That's 57% of the after-repaired value. That's a great deal.

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Here's what happened. That deal came into our office today from one of

our acquisitions guys, and the offer was made, the offer was verbally accepted.

We had the ability to go under contract on that deal today. We did. We signed the

contract; we put it under contract; and now we are in the driver's seat to make

money on that deal. An acquisition system is the first key.

Now, what are we going to do with the deal? We've got to think about that.

We've got to, because it's great to have an acquisitions system that works.

People can put properties under contract all the time. But if you don't have an exit

strategy ready to go, you are going to likely struggle in this particular business.

What is our exit strategy?

We've got it under contract at a great price, and to be honest with you, we

have it under contract at a slightly lower price than what I just told you. Why am I

thinking about $119,900 as the purchase price when I'm thinking about the deal?

Because I'm thinking about this deal from an exit strategy of if I wholesale the

deal is it a great deal at a certain price. At $119,900 is it a great deal if another

investor buys it from me and pays me a few thousand dollar wholesale fee? The

answer is yes. It's a great deal.

The other side of that coin, that's my wholesale exit strategy. The other

side of the coin then is me asking the question what if my retail, what if my

construction company buys the house and fixes it up. If I pay $119,900, am I

getting a great deal? Is my construction company going to be in a position to

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make a decent profit? Again, the answer is yes, because we have gone through

an evaluation process.

Third, what if my buy and hold company decides to buy that house? At

$119,900 is it a great deal for my buy and hold company at that price? Again, the

answer is yes, because it's a greatly discounted, significantly discounted price.

I just went through wholesale exit strategy, retail exit strategy, and hold

strategy, but what do I do? What did I do? I actually control that deal for a price

slightly less. So at $119,900 it's a great deal whether I buy it or another investor

buys it.

If I flip it, if I wholesale it to somebody else, or quite frankly, now catch this.

This is a key little piece. If I flip it to myself, if I flip it to one of the other entities

that I own or control, I am always creating a wholesale cash flow. We've talked

about this in other chapters, but that is a key part of success in the real estate

investing business, developing your acquisition system.

System #2: Deal Evaluation System

We use a board in our office and a couple of different spreadsheets and

different ways to look at deals, to plug some numbers and really make a decision

on what kind of a return on investment a particular deal is going to offer us. I am

always looking at it from the standpoint of how cheap I can buy the deal. How

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much of a discount can I get this deal for and be in a good position to make a

profit?

I am mostly interested in what is called a cash on cash return. How

much cash I have invested versus how much cash I get back in my profit. That's

a cash on cash return. So my deal evaluation system is critical.

The acquisition system and the deal evaluation system are integrally

linked. You really don't know if you've got a good purchase in acquisitions until

you know what a good deal is. So they tie very, very closely.

System #3: Funding System

The third system is the funding system, your financing systems, your

money systems. It's the lifeblood of your real estate investing business. How are

you going to fund the purchase of this particular deal?

As a wholesaler, your buyer is going to fund your purchase.

As a rehabber, you are going to fund the purchase.

As a buy and hold investor, you are going to fund the purchase.

You've got to ask yourself:

• What is the deal?

• What is my exit strategy?

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• How am I going to fund the particular deal?

A lot of times, depending on what the market tells us and how the comps

and the comparables read and position a particular neighborhood in a market will

really dictate to me what source of funding I will go after to close on a particular

deal. You know, because exit strategy is key, not all money is created equal.

In the first chapter we talked extensively about the five different funding

options that you have. In this chapter we are going to talk a little bit more on the

private money side. But the third system in your successful real estate investing

business is your funding system. Part of your funding system is to be out there

constantly seeking, searching, making sure you know what the market is doing,

and always having access to new and alternative sources of money.

The minute your access to financing or funding dries up, your business

dries up. Think about what I did. We started off the chapter talking about the real

estate triangle. If you did what I asked you to do, you have a triangle drawn in

front of you. At the top of the triangle you have great deals; at the lower left you

have money. What did I say? If you don't have great deals, you don't have a real

estate investing business. If your money dries up and your options and your

sources of funding dry up, what happens to your real estate investing business?

It goes away.

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Each one of the points on the triangle, as I said earlier, if you focus and

test everything you do against those points on the triangle, you will have greater

success in this business.

System #4: Construction System

Let's talk about the fifth system that totally comprehensive real estate

investing business has, and it is a construction system. From acquisitions to

evaluating the deal to choosing the appropriate funding option to construction,

you are handing off from system to system inside your business. When you hand

off the deal to your construction system, here is what's critical. Your construction

system has to ask the questions:

• What is my intended exit strategy?

• What is my highest and best use for this particular house?

Here is where that comes into play. Number one, what is the exit strategy?

The exit strategy will tell your construction system what level of rehab you need

to do. Do you need to really fix this house up, so that you can sell it retail? Or do

you need to fix it up enough so that the bones of the house are good, it's clean,

it's safe, but you are investing as little money as possible, because you are going

to buy and hold for a long-term rental?

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Your construction system has to ask that question of exit strategy. Your

construction system has to ask that question, because the quality differential in a

retail fix to a rental fix is generally significant. We're usually talking a minimum of

$8,000 to $10,000 difference in a construction budget between a retail fix and a

rental fix.

Now, the other part of this is understanding the scope of work. If your

construction system is supposed to add a bedroom, plumb in a new bathroom,

and build a garage, your construction system better know that. Where did that

come from? Well, it probably came from your acquisitions. Your acquisitions

group up front said here's what we're buying. It's a two bedroom, one bath house

on a nice, little lot that has an alleyway. Your deal evaluation system then said

the houses that are selling in this particular area the fastest are all three

bedroom, two bath houses with a garage.

So you went from your acquisitions of a two, one with no garage to your

deal evaluations saying the best houses that are selling the fastest are three,

twos with a garage. Handing that information off to your construction system is

critical, because if your construction system doesn't go out and build a three

bedroom, two bath house with a garage, your exit strategy is potentially in

jeopardy. You are not going to hit the after-repaired, fixed up value numbers

when you actually go to sell the house. You are going to get to the end, and you

are going to say, well, in our evaluation in our acquisition system process we

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estimated a $210,000 exit price. But we ended up with a house that, when we re-

look at the comps, only sells for $185,000. Why? How did that happen?

Well, the construction system didn't catch that it needed to frame in an

extra bedroom and plumb in at least a half-bath and build a garage in the back. It

missed a major component to the scope of work. So acquisitions to deal

evaluation to funding and financing to construction.

System #5: Selling and Leasing System

Then, the final handoff comes after construction is complete or through the

construction process. It is handing off then to your selling and leasing system.

Let's think about this for a minute, because in the first chapter I borrowed

the phrase from another local investor that is a friend of mine. The phrase was

the five components of this business are: Find, Fund, Fix, Flip, or Fill. Those

are the five Fs. The systems that we just talked about are really those systems.

Acquisitions, deal evaluation, funding, construction, and then selling and

leasing. That's the process from A to Z, from left to right, that every real estate

deal and every successful real estate business goes though.

Here's one of the keys to exploding the growth of your real estate

business. Now, that can mean you're just starting out. Explosive growth, if you've

never done a real estate deal before, is doing your first deal and making your first

$10,000 or $20,000 or $30,000. That's explosive growth. That's exciting, and for

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most people that's half of their year's salary on one deal that can take place in

ninety days or less. Is it reality? Absolutely.

We went under contract today, in fact, I left my office to come home and

sit here at home tonight and do this call from my house. Before I left, I signed the

sales contract on a house that I bought less than sixty days ago. So I bought it

sixty days ago; I've now gone through the construction process; I fixed it up; I put

it back on the market this week; and I got an above full price offer within the first

week of the house being on the market.

To give you an idea of the numbers, we bought it for $88,000. We put a

little over $20,000 into the construction rehab and the fix-up, and we sold it for

$168,000 with some concessions back to the buyer. They are an FHA buyer. Our

net profit on this particular deal, because we've got the nicest house at the

cheapest price in the neighborhood, and we knew what was selling when we

bought the house. It was a three bedroom, two bath house. We made it a four

bedroom, two bath house, and we cleaned it up and spit shined it so that it's just

a peach. It's just a nice, great little house.

So where does that leave us? It leaves us making around $35,000 net

after we pay realtors fees and closing costs and concessions and all the things

that go into a real estate deal. Here's the clincher. Our buyer is getting FHA

financing, and with FHA financing we have to own the house for at least ninety

days in order to sell it to a homeowner that would buy it from us. So we've only

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owned it about sixty days right now. We've got to actually wait about another

month to be able to close.

Well, it's all going to work out. There are little tricks to dealing with FHA

financing. We actually can't have our contract signed until the ninety-first day,

and then it's going to take us five to ten days after that to actually close. So we

will close in a little over a month from now, which is maybe a week longer than

what our normal contract would be if we had a thirty day traditional sales

contract. But you know, not a bad little deal for being in and out of this thing in

about a hundred days, about a $35,000 profit. Now, for somebody that makes

$70,000 a year, which is not a bad salary, that's not bad money to make on a

quick little deal.

Let's step back and think about it for a second. If you're a wholesaler, and

if you pick your niche of real estate investing and you become a wholesaler, you

are going to be the guy that finds the deals, and you are going to make $1,000 to

$3,000 to $5,000 to $10,000 flipping very quickly with no risk and no ownership

risk, no financing requirements, real quick. You are just going to be in and out of

deals. You are a wholesaler.

The wholesaler, though, is limiting their income potential significantly. I

love being a wholesaler. I will always be a wholesaler. But I also recognize that it

may take me six or eight deals as a wholesaler to make the same kind of money

that I make on one deal as a retailer. So you have to start to ask yourself the

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questions of what do I want to do, where do I want to put my time, energy, and

effort. Wholesaling is great, consistent, easy, get paid every week kind of cash

flow. Retailing then is the big chunks of cash that really help you take your

income to a whole new level. As I have mentioned before, holding real estate

long-term then is the wealth-building component.

If you are looking for ways to build, grow, and explode your real estate

investing business, if you are just starting out that could be that first deal. Maybe

you are going from where you are to doing a couple of deals a year. Maybe a

deal every quarter, four deals a year. Or maybe it's really ramping your business

up and closing several properties a month. No matter where you are in that

explosive business growth process, looking back at that real estate triangle and

saying what part of this triangle do I or don't I have figured out.

When you ask yourself from the real estate triangle standpoint do I have

systems built for acquisitions? Do I really know how to get a ton of acquisitions in

my pipeline? Do I know how to buy three or five or seven or ten or fifteen or

twenty deals a month? Do I know how to do that? If the answer is yes, fantastic.

Turn up the volume and start doing it.

You may be saying to yourself, Well, Rob, the problem is I don't have the

money to close that many deals.

Okay. Let's drop to the lower left part of the triangle. Let's fix the money

side of the equation. Let's fix the money side of your business. If you know how

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to turn on the volume of deal flow, but you lack the funding ability to actually get

the deals closed, you've got to fix that part of the business.

Maybe it's coming over to the network or the resources side and saying,

you know what? I know how to get the deal flow turned up, but I really need to

focus on building a bigger buyer list. As a wholesaler, I need to have cash buyers

that want to buy deals for cash quickly. Maybe it's focusing on that network side

of the business and putting yourself, your business in a position to take those ten

deals a month that you can find and move them for a $5,000 to $7,000 or

$10,000 a month profit.

Think about it for a minute. If you can find ten deals a month that are great

deals, and let's forget about the money side of the business for a minute. You

don't have cash. You're not going to finance them yourself. But you build a great

buyers base. You've got ten deals, and you've got twenty solid cash buyers in

your network. What is your income potential that month?

Let's say you wholesale the properties, each one of them for a $7,000

profit. That's a $70,000 month. That's a fantastic month, because you know how

to find great deals, and you know how to build your network and your system to

move that deal to somebody that wants it, and they are willing to pay you a great

fee for it.

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If you're not in a position to do that today, you need to learn that aspect of

this business. It's the key that will take you from wherever you are today to

consistent cash flow and a whole new level in this business.

Let's look at another side of it. Let's say all of a sudden that's what you

focus on. You focus on finding great deals. You know how to do it. You put the

systems in place. You have modeled what we do in our business, and you've got

great deal flow. All of a sudden, your twenty buyers have spent all their cash, and

they are no longer a buyer. What are you going to do? You are kind of stuck.

Your $70,000 month turned into a zero dollar month if that's where you leave

yourself.

Well, what if you focus then on the money side. In an earlier chapter we

talked about the five different areas of money and funding available to real estate

investors. Let me tell you what I absolutely know to be true. This is 100%

absolute truth. No matter what other source of funding you use, whether it's

traditional financing, hard money, flash cash, no matter what it is, your business

will always, always, always be limited until you learn to raise private money.

Period.

That's a pause to make a point. Without raising private money, without

having access to private capital and private funds, your business will always be

limited to its full potential. That money piece of that real estate investing triangle

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is really, really important. I can't stress it enough, because once you pick your

niche and you call yourself, and I hope you call yourself all three.

Here's what I hope you do. I hope you begin to call yourself a wholesaler,

a retailer, and a buy and hold investor. I hope you call yourself all three, because

no matter what you call yourself from the exit strategy standpoint, that's your big

picture business plan in the real estate investing business. All of the other arrows

that you can add to your quiver are technical skills.

I can list them down.

• If you become expert at negotiating short sales;

• If you become expert at buying foreclosure deals from distressed

homeowners;

• If you become expert at working with REOs and bank-owned

properties;

• If you become an expert at using owner financing to buy great

deals;

• If you become great at marketing and private seller negotiations;

• If you become fantastic at rehabbing and construction

management;

• If you figure out how to buy and market and get free and clear

properties and probate deals and out of state distressed landlords

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• If you become great at property management and land lording;

• If you learn how to stage your houses, do the construction, and sell

properties fast;

• If you figure out seller financing and how to carry terms and sell on

terms;

All those things that I just mentioned are technical skills. Plug those

technical skills into the real estate triangle that we're talking about, and you are

going to see that all those technical skills without great deals, money, and your

network and resources are irrelevant.

You can be the best short sale guy in the world at negotiations, but if you

don't have the other three, you don't have profits. Profits come only through

closed deals, and you only close deals when you've got those three things from

the real estate triangle working on your behalf. So finding great deals, money,

and your network and resources.

Let's talk about the money side, because the key, beyond finding great

deals, beyond building a great exit strategy and a network and the people that

are involved in your business, when I'm talking about that network, let's define

that a little bit. I'm talking about buyers on your wholesale buying list, cash

buyers. I'm talking about the real estate agent that you engage to sell your

properties. I'm talking about the management companies that you engage to

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lease and show your long-term holds. Those are the resources. Those are the

team members, the people that make your business tick.

You cannot do this business on your own. You can't do everything by

yourself. You have to reinvest time, energy, effort, and money back into your

business to have other people involved that are going to help in your business

growth. The key to explosive business growth is controlling the money.

Inside your business it's controlling the money. It's having access to

private money.

Outside of your business the key to long-term business sustainability is

controlling the deals. You've got to control the deals from an external standpoint,

and you've got to control the funding from an internal standpoint.

Think about that for a minute. Think about how that plays into your existing

business. No matter where you are in your business today, what if. Let's ask the

what if question. What if you control the deal externally? In the market around

you where you are working, you control the deal flow. Inside your business, you

control the cash. You control access to capital to do any deal that you want to do.

If you control those two things from external to internal, you are in a position to

explode, absolutely explode not only the growth of your business but your

business net profits and your personal income. Private money is the key to that

explosive growth.

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Let's think about it: traditional financing versus private money. We talked

about it in the past. We've touched on it before. Private money is the only source

of funding where you as the investor set the terms. Every other single source of

funding that is out there and available to you as a real estate investor has the

terms set for you and is telling you what you have to do in your business in order

to "qualify" or get the money. With private funds, you are in control. You are

setting the terms, and you are letting other people into your business to

participate.

I am going to take a little sidebar here for a minute. I want to talk about the

recent, like the very recent, like the we're in the middle of major financial turmoil

in our country right now, which quite frankly has been a catalyst for tremendous

growth and opportunity within our business. When the masses are running from

real estate, we are cleaning house.

Inside this side bar, Lehman Brothers, Merrill Lynch, Fannie Mae, Freddie

Mac, they are all struggling. They are all going under, and the federal

government is stepping in with a massive, huge bailout. What caused the

problem to begin with? Whey did we get to where we are?

Everybody can answer the question. You know, we had unscrupulous

lending, or maybe not even unscrupulous, but we had loose lending. We had

money that was given to people that probably shouldn't have gotten it, couldn't

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afford it. It was repackaged; it was resold; it was restructured; it was securitized;

it was moved to Wall Street; all of these things.

Here is what ultimately happened. You had a bunch of hotshot twenty-

eight year olds on Wall Street, you know, these geniuses that, to be honest with

you, really haven't lived enough through the business world to know what bad

debt can mean and how debt effects a P & L statement, let alone how it effects a

balance sheet. You've got all these young hotshots that are out there just

wheeling and dealing and making all these deals, and all of a sudden there is

massive debt on the books of these major, hundred year old, traditionally

perceived, steadfast, conservative companies that have now been trading in

relatively volatile assets that were so volatile because of the depth of the debt

associated with those assets. They have become liabilities. They have become a

bad asset on the book, and they are taking the balance sheet down.

And so the fastest way to put your business in a failing situation is to

misuse debt and misuse private money. That's why it's key that when you use

private money one of the things that I always teach and I always tell people in

private money is to set up an exit strategy and a plan B with your private lenders.

See, it's not enough just to have a decent game plan. It's not enough just to

decide that we're going to borrow the money at X percent interest rate, or we're

going to partner on the deal, or however your deal is structured. It's not good

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enough to have just one plan, because what if your plan A doesn't work? You've

got to have a plan B in place up front.

So one of the keys to raising private money is to have a plan A and a plan

B and sometimes even a plan C that you've negotiated or you've presented with

your private lender up front. So if A happens, exit A. If B happens, exit B. If C

happens, exit C. Everybody knows what the terms of the private money are up

front.

There are four basic types of private money:

1. Existing Seller Financing.

We're not really get into talking much about that. That goes into a whole

other aspect of finding deals and real estate investing. If you go back to one of

our earlier chapter, we talk about every real estate investment deal start with

either a significantly discounted cash purchase or a highly flexible terms

purchase. So private money in the form of seller financing really falls under the

guise of a flexible terms purchase.

2. Private Party Secured Loans.

They are notes and deeds of trust secured against real estate. So the key

is that your party, that is the person that is your private lender, is lending you

money. Think of them as Uncle Wells Fargo. Now, I don't know that I would

necessarily recommend that you run out and try to borrow money from friends

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and family. Sometimes that's a great source. Other times, you know, it's better to

keep the Thanksgiving dinner table free from business.

For example purposes, let's think of our private party lender as Uncle

Wells Fargo, because really all the private investor, the private lender is doing is

taking the place of the bank. So banks call the shots, don't they? Well, when

you're going to a private lender, you are calling the shots and you are setting the

terms of how this deal gets paid out, how the deal gets structured. I'll tell you

what, one of the absolute coolest things you can do in your business is you can

structure all of your deals so that you never, ever, ever have negative cash flow.

When you really figure out how to use private money effectively and use it

right, not only will you dramatically increase your monthly cash flow, because

you're going to structure every deal so that you get paid four different ways, but

you are also going to structure it so that you can never have a negative cash

flow.

Dramatic pause once again.

I want you to grasp that. You are going to increase your cash flow on a

monthly basis, on a weekly basis, on a daily basis, and you will never have

negative cash flow, because you are setting the terms.

3. Private Debt.

4. Private Equity.

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Depending on how you go after raising private money, there are a lot of

legal snafus that you can fall into. It's against Securities and Exchange

Commission law and regulation to advertise for private debt, for private equity, for

securities. So the key is in structuring your deals so that you don't cross the lines

of the Securities and Exchange Commission guidelines. That's an absolute must.

Once you figure that out, and once you are not crossing over the line of

the Securities and Exchange Commission, these four types of private money, as

I've already mentioned, will help you start to explode, explode, explode your

business. So if we are looking for explosive business growth, if we are looking to

go from wherever we are today to the next level, test every question, everything

you are trying to do against that real estate investing triangle.

Fixing, Construction, and Construction Management

This once again goes back to the acquisition side. This aspect of your

business is just another in the forms of cash flow that you will create. If you are a

rehabber or a buy and hold investor, the money that you will make from the

construction side of the business should be substantial. Most people miss this

point. Most people don't get paid on the construction aspect of this business, and

I have to ask the question why.

If you are a contractor, and you go out and do a contracting job, you make

money. You get paid. You earn a living. And all of a sudden, when you become a

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real estate investor, you think about, well, I'm a contractor, so I can do the work.

You immediately discount and discredit every skill that you have, and you

devalue it, and you don't pay yourself.

Now me for example, I'm not a contractor. I don't go out and do

contracting jobs for other people. I have absolutely no desire whatsoever in the

depth of my bones to do that. But when it comes to real estate investing, I know

how to manage a project. I know how to move it from the acquisition systems

through the deal evaluation system through the funding system and right into the

construction system. I know how to set up my construction system so that it's

efficient, and it runs smoothly, and I know that the scope of work that needs to

get done is going to get done.

So if I put this system in place, and if I'm going to oversee the construction

management aspects of this job day to day or week to week, does it not make

sense that I should still get paid for that ability and that skill and that part of my

business? So even if you're just nothing more than a construction manager, and

notice how I say nothing more than a construction manager. That's a huge part of

being a rehabber and/or a buy and hold investor. In most people's minds, it's

discounted dramatically when you take on the role of being the investor. I want to

change that in your thinking. I want you to start to recognize the areas in this

business that you should get paid and where you should pay yourself extremely

well.

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So as a construction manager you have some choices. When you are

running the construction system of this business, you have choices on how you

go about this whole process. Let's talk about the different ways you can do it.

Generally, you want to have your scope. When you buy the deal and go

through the deal evaluation process, you as the investor want to figure out what

your highest and best use is for a particular property, for a particular deal. You

want to know what your scope of work needs to be. Then you have a couple of

options.

Option 1

You can just hire a general contractor. A general contractor is going to

run the entire job. They are going to hire all the subs, all the individual trades that

need to get done, and they are going to buy all the materials. They are going to

give you a bid based on your scope of work. They are going to run everything

from there. That's option one. In this option, you pay the highest price, but you do

the least amount of work.

Option 2

You can act as the general contractor, and you can hire all of the subs.

You can sub the work out. You can buy all of the materials, and you can hire out

all of the subcontract labor. So now what you're doing is you are separating the

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labor from the materials purchases. When you act as the general contractor and

do all the materials purchases yourself and hire out all your subs, it requires the

most work, but you will probably get the best price.

Option 3

You can act as a construction manager, and you can do a combination

of options one and two. You might hire a general contractor, or you might act as

a construction manager. You might hire a job or a construction superintendent

that will then subcontract out the labor, and the superintendent will be in charge

of buying materials. What you have just done is you have stepped yourself away

from being very much out of the picture. This option is some point in the middle,

where you are acting as the construction manager. You are hiring a

superintendent who is then subbing out the work to the labor and doing all of the

materials purchases. You are going to pay a little bit more with this approach

than if you act as the general contractor, but you are going to pay less than if you

hire a general contractor.

For me it becomes a balancing position. Where is the best use of my

time?

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Here is a great example of how we go back to the real estate investor

triangle, and we ask that question. If you are going to act as the general

contractor because it's how you're going to get the cheapest prices and the best

deals on materials, and your going to run the ship, when you go back to the real

estate investor triangle and you say, great deals, money, and building your

network, where does it say you should be running construction projects? It

doesn't.

For explosive business growth as a real estate investor, your highest and

best use is not running construction jobs. Your highest and best use is stepping

back and saying inside this real estate triangle that we have what parts am I

lacking on today? Where am I missing some of the picture?

You have got to ask yourself when you get to that construction system

how you want to set your business up. I highly recommend that you set yourself

up from the standpoint of the construction manager. Pay a little bit more, but take

your time and put it into the areas that will absolutely increase your profits and

your cash flow significantly.

We move on then to the final system that we are talking about in this

chapter. It's the selling and property management systems. It's the selling and

leasing systems. When you get to selling your deals, there are a couple of keys if

your goal is to really get in and flip the deal quickly and sell the deal.

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We're not going to talk about selling it from the standpoint of being a

wholesaler. That's a little different conversation. When we're moving to the selling

and leasing system, we're really talking about you’re a rehabber that is selling the

property, or you are a buy and hold investor that's leasing the property.

Keys on the selling system are really nicest house, cheapest price.

We've hit that time and time and time again. Nicest house at the cheapest price.

Then the key is to gain maximum exposure out in the marketplace so that you

can put your properties in front of as many potential buyers as humanly possible.

The key is to find somebody that's really good at it. Again, my job is not to

do that. My time is not to be spent putting listing sheets together and sales

sheets together and taking pictures and staging properties and cleaning houses.

That's not the best use of my time. Whether I’m doing one deal or whether I'm

doing twenty deals, it's not the best use of my time. I need to look at and I need

to ask the question what is the best use of my time. We are going to test it

against the real estate investing triangle.

Same thing from the leasing standpoint. It's not the best use of my time to

write listing ads and answer phone calls from tenants and negotiate lease terms

and write up contracts and do tenant screening. It's not the best use of my time. If

you are efficiently using your time in this business, the extra $100 a month that

you pay for management services, the money that you spend here and there you

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will make back tenfold just by running your business intelligently. You are going

to be putting your time in the places where it's the most efficient.

That covers the five systems that I wanted to talk about in this chapter. As

we wrap up this chapter, here is what I want to do. I want to introduce you to

something that I'm putting together that I think is going to make a huge difference

in a lot of people's business. This is something that I've spent the last decade of

my life learning, perfecting, putting into place, figuring out systems and grasping

this whole concept of this real estate investing business, such that I can sit down

and talk for an hour and just scratch the surface on this whole business.

We are scratching the surface on what to do and how to do real estate

investing. We want to keep it simple, because we don't want to overcomplicate

anything that we do. Yet, we want to make it detailed enough that we really get

maximum efficiencies and maximum profits for all of our efforts.

When I talk about acquisitions and buying systems, I'm talking about a

buying machine. I have several people throughout the Denver metropolitan area

that constantly ask me, you know, every time they bring a deal up, I already know

about it. I know the address; I know something about it; we have probably made

an offer on it. We have probably tried to buy it. Maybe we've negotiated with the

seller. So I get told a lot that, and this has kind of become a funny little phrase, I

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say my goal in acquisitions is to be everywhere all the time. That's the key. That's

what I want to do.

The goal of my acquisitions group is to be everywhere all the time. If it's a

deal, we want to know about it. Maybe we don't get it. Maybe we don't get every,

single one. But we want to know about it. We want to get the best properties from

banks. We want to be there when the distressed seller or the seller that owns

their property free and clear is ready to just dump it. We want to be there when

the out of state or the distressed landlord has had enough and is just saying, you

know what, let's move on. Let's get out. We want to be everywhere all the time.

It's our goal in acquisitions.

In every one of the systems there are specific little steps, little things that

we do in our business to make that work and make that successful. Later this fall,

I'm actually going to release what I am calling the Distressed Property

Dashboard. It's a step by step system, an online group of tutorials, videos,

audio, and a step by step system on:

• Exactly where we find our motivated seller leads;

• How we scrub mailing lists;

• What postcards we use and how we send postcards;

• What type of marketing systems we use outside of the MLS

• How we make offers inside the MLS

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• What we do with private funding.

It's a complete A to Z of this business. Everything that we've been talking

about for the last three chapters is going to be covered in detail in the Distressed

Property Dashboard.

If you are interested in learning more, you can go to the website

www.DistressedPropertyDashboard.com, and you can sign up for our early

release group. I haven't released this to the public. Nobody has had access to it

other than our business internally, and we have used these steps and these

systems and tested and proven what it is that we do.

You can find out more about what we are going to be doing with the

Distressed Property Dashboard by going to that website, signing up with the

early release group, and we will keep you informed over the course of the next

month or so as we get ready to make this available publicly. So go check it out.

The fourth chapter in this series is going to wrap a lot of this stuff together

and yet get detailed-specific on some things that we haven't yet covered. You

may be thinking, holy smokes! We've got so much information so far. We really

dove into this business pretty deeply. We have, and we can go even deeper,

because the deeper you get, the more detailed you get, the more of this business

you break apart into little chunks and little pieces, the easier it gets to absolutely

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dominate your local market, your deal flow, your funding, your money sources,

and the whole business, and really explode your profits.

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Training Session Four

Looking back over the last three sessions, we have broken apart and come

together on the real estate investing business from an A to Z standpoint. I've broken apart

the five areas that are really critical in any real estate investor's business in order to attain

success. As I've shared with you and given you insights and ideas and tips and strategies

and specific things to go out and do, I'm bringing that information in from a lot of past

experiences.

So what I want to do in this session is work on some things and talk about some

things that are slightly different. They are as important as anything that we've talked

about in the specific, detailed training sessions to date, but they are going to help you

create focus in all of the aspects of your real estate investing business and bring you to a

spot where you can actually get your hands around all of the things that we've talked

about doing and all of the things that

create success in this business.

You know, there is a reason you

are reading this information. It's because

you want to go from wherever you are

today, wherever you are in your real estate

investing business, wherever you are in

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your personal life, in your personal finances, in your business finances, you want to go

from wherever you are today to a new level. That's why we all educate ourselves. That's

why we invest time and money and put ourselves out there to learn and grow and get to a

spot that we want to be.

So in this session I want to start off by talking

about what we all have heard before and had people

throw at us. It's the 80/20 rule. What happens is if you

look at the 80/20 rule as it applies to real estate

investing, what is it? Well, most of the time people spend 80% of their time on wasted

things. They only spend 20% of their time on productive things. So the 80/20 rule is if

you've got 100% of your time out there that you could do something and you could be

productive, 80% of it gets wasted by most people.

Now, I'm the perfect guy to say, hey, I know that is true. I know that is the case,

because for the last ten years of me learning the real estate investing business I can look

back on different seasons of my business and different times in my professional and

personal life and say, yes. You know what? There was a

ton of time that was wasted. Here was a season where I

was very productive. I got a lot of things done. Why is

that?

Well, it's human nature for one. It comes down to focus in most cases. We broke

the real estate investing business into five chunks over the last three sessions. Each one of

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those pieces of the real estate investing business is critical, and we've talked about how

you work your day, what are the three critical areas to focus on, where do you put your

time, and how do you make those things happen. The 80/20 rule applies. Too many

people lose focus, or actually not even lose focus but they really never attain focus,

because they don't know what to do on Monday morning when you wake up at 6:00 in

the morning. You're up early, and you're ready to hit the day. You're ready to start the

week. Most people don't know what to do to create success. So there is this lack of focus

many times because there is a lack of knowing what to do.

Now, once people do figure out what to do,

they still don't focus. This is me looking inside

myself as I was thinking about this bonus session. I

thought what was it really that pushed me over the

hump years ago? What was it that got me to a point

in my real estate investing business that I didn't

wonder where my next deal was going to come

from? I didn't wonder where my next pay day was

going to happen. I didn't wonder if I was on the right

track, if I was putting my time in, and if I was doing the right things.

It was getting over the hump of that 80/20 rule, which frankly most people have it

even more imbalanced than 80/20. Most people are probably 90/10, maybe even 95/5,

where most of their time is unproductive.

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What I want you to do as you read through this is I want you to step back and take

stock in your day, your life as a real estate investor. Are you focusing on the few vital

things in your business, the things that do create success, the things that do increase the

profits on a given deal, and the things that will make your more money and get you paid

more regularly and more repeatedly? Are you focusing on those few vital important

things, and can you ignore the trivial things? Can you put to the side things that really

don't matter?

I want you to take stock and ask yourself that question as you read through this

chapter. I'm going to give you a good example of that. You know, I go through this all the

time. I work on improving my productivity and improving my lifestyle through that

productivity every, single day. If I focus on the few vital things that I know that I have to

do, and if I can ignore all of the trivial things that bombard me on a daily basis, I'm more

productive. I have a better day, and my family likes me better, my employees like me

better, and everybody around me likes me better. That's where we're headed over the

course of this chapter.

Applying the 80/20 Rule in Different Areas of your Life

Where does this matter? As we come full circle, you are going to see how

important this is to be successful as a real estate investor. Stick with me. Take stock in

your own timeframes, in your own day, and apply what I'm saying about my own

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experiences to your life. The area of your life that is critical and important to apply this

principle in is your time, the general use of your time.

Apply this principle to the time you spend on:

• Your personal life

• Your business life

• Your interaction with friends and family

• Happiness

• The things that you strive to do

• Your marketing efforts in real estate investing

• Construction projects

• Designing the flow of a rehab house

• Planning your exit strategy

• The food you eat

• The lunch that you have

• The Starbucks that you go to

• Overall the lifestyle that you are looking to create.

Think about applying this 80/20 rule and flip-flopping the 80/20. I want you to be

80% productive, and 20% gets through the filter. I want you to be more productive, and I

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want you to be better at filtering if possible. A lot of times, if you can just switch some

simple things in your day, in your life, in your business and apply what you do to your

real estate investing business based on this 80/20 rule, you are going to increase your

profits dramatically. Believe me. Take it from me. I know what it's like to be

unproductive, and I know what it's like to be productive and efficient.

I will tell you that as I look at my P&L, profit and loss statement on a month by

month basis; it's really easy to see when we're very productive and when we lack

productivity. Let's look at the things that we do in our business work. We know how to

go find great deals. We know how to run and set up our private money. We know how to

pay cash. We don't have a question on whether we're going to close on a property or not.

We know how to find our contractors and set up our rehab crews. We know how to do all

of these things.

There's no question of do we know what we're doing, and are we wasting time on

the wrong things. We know what to do. So what happens is we let non-productive things

come in and filter into our time.

Time Blocking

What I have tried to do and what I do in my business is I try to block out chunks

of time throughout the day. So I will block out chunks of time when possible so that I

have a couple hours. Let's say it's a two hour period of time where maybe I'll work 50

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minutes, take a 10 minute break, and work another 50 minutes. I'll

block two hours of time, and I will tackle and attack the

administrative things that I need to get done for this particular

given day.

So we're going to talk more about time blocking and applying it to real estate

investing and running your business and your life efficiently. But let's think about for a

minute, what are the non-productive time killers that come in and destroy you? They

destroy me. You know, some of these aren't bad things inherently, but they don't allow

you to be as productive and efficient and profitable as you should and could be.

Time Killers:

1. Talking to people or other coworkers or family.

2. Talking to friends

3. Getting phone calls on the cell phone

4. Getting an instant message on the

computer

5. Getting an email.

Those are generally non-productive time killers and time wasters. So let's think

about the time block scenario. If you block out a 50 minute period of time, but you get

two people that come in and want to talk to you, three phone calls, and six emails, your

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50 minute block of time has just whittled away to actually being probably less than 15

minutes productive. What you have to do is you have to shut yourself off from those

outside influences.

Surfing the Internet. It's easy to sit down and go to work. Now, come on, I know

some of you, I hear you laughing. I hear you listening to what I'm saying, and you know

you do it. You know it's true. You know that if you sit down at the computer, if you go to

check your email, if you have goals for the day, if you are ready to attack certain things

it's easy to pop open your Internet browser and go surfing online.

Here's what you do, because I do it too, sometimes. Look, I'm not perfect. You're

not perfect. Here's what we do. We justify our energy and our effort online and surfing

the Internet because we are doing business-related surfing. So we justify our

unproductive lack of productive time.

I'll tell you what, that kills your ability to drive seller leads in the door. It kills

your ability to manage your acquisitions and your offer-making systems. It kills your

ability to run your marketing effectively. It kills your ability to manage all of the other

aspects of your business. You need to be working on the highest per hour rate revenue

generating things in your business.

I'll give you a good example of this. One of the students in my coaching program,

he and I spoke yesterday. He was frustrated. He was struggling. He was in the middle of a

deal, and it was overwhelming. It was a property that he bought. He bought it right. He

bought it at, you know, 60 cents on the dollar. He's fixing it up. He's running the rehab

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right, but he's running the rehab, and he's buying materials, and he's involved in every

single aspect of the deal. He hasn't efficiently delegated. He knows he hasn't efficiently

delegated certain non-revenue-generating tasks that he should be able to allow other

people to handle.

His justification was this. Well, you know, it was my first deal, Rob, and I really

just wanted to learn and be involved and get an all-around, all-encompassing knowledge

of the business. Okay. That's noble, but it's not necessarily profitable. What he has done

now is he has killed and just sucked his available time to do other parts of the business

that will actually make him money, and he's poured all of his time, energy, and effort into

things that he has just decided to do himself.

We sat and we looked at the five different parts of the business. You know, he has

jumped into real estate investing in the last year. He has educated himself. He is a trigger

puller. He is doing it. And yet, at the same time, he has gotten frustrated, and he has

gotten kind of pulled down. He has ground himself to this halt.

So what we had to do is we had to look at the five aspects of real estate investing,

and in this coaching session I simply asked him two questions:

1. When you look at the five aspects of the distressed property investing

business and what you are doing and how you are trying to move yourself

to the next level, what are the parts of the business that get you excited?

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2. What are the parts of the business that make you just not even want to do

another real estate deal?

In his particular case, he hated the acquisition side of the business. He did not like

it at all. He didn't want to do it. He just struggled with the whole concept of setting up all

of the systems and doing all of the different things that it takes to build an acquisitions

piece.

What he loved was what he had learned and what I had taught him on raising

private money, how to structure his deals, how to build a marketing engine to find

money, to fund deals for cash. He loved the ability to sit down and talk with potential

private lenders and get them on board with him. That part of the business got him excited.

You know, the other part of the business that got him excited was actually being

involved in the transactional part of the deal itself, closing the transaction, managing the

rehab, not doing the rehab. This is where I had to kind of beat him around a little bit. I

had to get his mind thinking he needs to be at a manager level or an executive level at a

minimum. He can't be rolling up the sleeves and in the trenches doing it.

Now, some people that want to do a deal here and a deal there, that's okay. People

roll up their sleeves in this business all the time and go make it happen. We are talking

about taking a real estate investing business to the next level and running it like a

successful business. To just do a deal here and a deal there, you know, people are going

to roll up the sleeves. People are going to grab the paintbrush and go make some things

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happen. That's not what he was trying to do. He was trying to take it to the next level and

get his personal income to a level of $15,000, $20,000, $25,000, $30,000 plus a month.

That's a very doable, that's a very realistic goal as a real estate investor if you focus on the

productive things in your business and do the right things.

I want to focus on some of the other non-productive times. Let's go back to

surfing the Internet, reading your email every couple of minutes. How many of you sit

with your finger on the mouse button, and it's like a rapid fire trigger. You hit send and

receive every five minutes. If you're laughing, you know you do it. I will tell you, you are

killing a ton of time.

Answering your phone. In our society today we have this mentality and this

expectation that everybody is instantly accessible when we want them to be accessible. I

will tell you, I had to make a decision about six or nine months ago that I just couldn't be

instantly accessible and available for everybody all the

time. It just was not going to work, because there were so

many aspects of our business going on. We had so many

construction projects underway. My superintendents were

out there working, and they would have questions. My

acquisitions manager may not know the answer for every

question. He would lean the crutch right over to me and

ask the question.

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I'll tell you what, people will make decisions, and nine out of ten times they will

make the right decision if you give them a little nudge forward and allow them the

flexibility to do it. Sometimes it's not even allowing them or giving them the flexibility.

Sometimes it is forcing them to make the decision, because you are not available. You

not being available sometimes is the best thing you can do for your business.

It is not having lunch meetings and talking on the phone and spending time for a

cup of coffee and talking with everybody that you run into out on the street, those are not

the things that, day in and day out, make your real estate investing business successful.

They are the easy, fun, nice things to do, but they are not the things that make you

successful.

Let's talk about what the productive time things are. The productive time things

are:

• Creating marketing systems

• Building your acquisitions systems

• Talking with sellers

• Talking with buyers

• Making sure that your real estate team, your sales enlisting team is on

board and doing the right things

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Highly productive, profitable time is spent writing offers and getting things out

the door so that you are doing deals. It's really easy to shuffle paper, have conversations,

go to meetings, and do everything else under the sun, check your emails, talk on the

phone, and ask yourself why you're not making a lot of money in real estate. It's really

easy to ask those questions and get frustrated. If you're not talking with sellers, making

offers, evaluating deals, meeting with potential private lenders, raising money, and doing

actual in the trenches deal stuff, you are not going to make the kind of income that you

expect to make from this business.

You are going to wonder why, because it's going to feel like you're busy, and you

are busy. It's going to feel like you're doing a lot, and you are doing a lot, but you are

doing the wrong things. So you have to ask yourself, where are the productive time

pieces of this business? Where do you have to be putting your time, energy, and effort on

a daily basis?

If we think back to the time blocking concept, it really gets down to you taking

control of your day and blocking out, making a road map of goals on a daily basis. I do

this better now than I used to do, but I sit down, and I try to plan out the goals for my

next day the night before. When I go to bed, what I like to do is I like to think ahead and

say, what are my goals for tomorrow?

It's not even just thinking one day in advance, because there are a lot of things that

we do in this business that require a little bit more planning than just twenty-four hours or

a twelve-hour period of time. So sometimes you have to plan even a little bit further into

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the future. But you have to have specific goals and time block yourself with those goals,

so that when the day comes, you are being productive, you are blocking the time, and you

are getting rid of the distractions.

There is nothing for me more

frustrating than having a meeting with

somebody that could be a productive

meeting, and they sit there with their cell

phone in their hand, and they are

constantly looking down at the screen,

because they are getting a text message, they are getting an email, the phone is ringing,

maybe it's on vibrate. They are complete distracted, and they are in four other places

other than the conversation that I am having with them. That is a pet peeve of mine, and

if I've ever done that to you, I'm sorry. I try to not do that, because it really, really bothers

me. It's one of those crazy things, but that's the culture that we live in. I have a friend that

does that all the time. He absolutely drives me crazy.

Your overlying goal is to increase your hourly rate. You can do the exact same

thing that you do in your day, in your business now, but you can increase your hourly rate

by hundreds of dollars an hour by focusing on the activities that are highly revenue-

generating activities. Then, you start to outsource and delegate and let others handle other

aspects of the business.

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You know, it's true, in the beginning you probably have to do a lot more than you

will a few months into it, if you have a good operating real estate investing business right

now. Maybe you are consistently easily making $10,000 or $15,000 or $20,000 or

$30,000 a month, but you want to take it to the next level. You have to begin to look at

how to outsource, delegate, and build leverage into your business. This is what I want

you to do. I want you to take the five areas that we've talked about in the real estate

investing business in the other chapters. I want you to just write them out on a piece of

paper.

1. Finding Deals

2. Funding Deals

3. Fixing Deals

4. Filling Deals

5. Flipping Deals

It's acquisitions, financing, rehab, selling retail, and then buy and hold. Those

are the five areas of the business. I want you to write those down on a piece of paper in

front of you, and I want you to look at each piece of the distressed property investing

business. I want you to ask yourself, how can I build scalability into the business? That's

the question that you have to ask.

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Once you are productive, once you are doing the right things in your business,

then it's time to begin to ask yourself how to build scalability into the business. How do I

start to leverage my time? You know, most people think of CPAs and attorneys and not

so much doctors, they don't necessarily bill on an hourly basis, but attorneys are the

classic hourly billing profession. What are they doing? They are trading their hour for a

dollar. They are trading their hours for dollars.

As real estate investors, what you need to be able to do is you no longer want to

be just trading your time for dollars. You want to be trading your efficiencies and your

systems for dollars. You want to do things in your business that make you ten times the

amount of money that you could ever do in a one hour period of time by yourself. So

you've got to begin to think and build systems and processes that make you money.

Let's step back and think about that again. You have to begin to build systems

and processes that make you money. I don't want you to get stuck in that rut that

attorneys get into. You know, I don't even care if they bill a $500 an hour rate. They are

still trading that hour for $500.

Is it possible to make pretty good money if you are billing at $500 an hour times

an eight-hour day? Sure. That's not bad. That's $4,000 a day. Can you make pretty good

money if you constantly can build that much on an hourly basis? You bet. But what are

you doing? You are working for all eight hours.

I don't want you to work for all eight hours. I want you to be able to work for two

hours or three hours or four hours or however many hours in a day you want to work. I

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don't want you to have to work eight hours to get $4,000. I want that to happen in an

hour, and I want you to go enjoy the rest of the seven hours and live the lifestyle that you

would want to live. You see, it's not about trading dollars or hours for dollars. It's about

creating a lifestyle working many fewer hours, because you have built systems and

processes, and you are focusing on what you need to do efficiently.

The guy that goes and chases a bunch of rabbits, the man that chases two rabbits

never catches either one. He is always jumping from one rabbit to the next, to the next, to

the next, and he's always one step behind. That's a lack of focus. So chasing rabbit trails

is a lack of focus. You've got to focus on one rabbit at a time.

A lot of times, people take the distressed property investing business, the five

primary segments of this business, and they try to put too many things into play at one

particular time. They try to do too much by themselves, all at the same time. So what

happens is there is an expectation of what this business will provide, and there is an

expectation of an income level that this business will give you. Yet, most of the time you

get in your own way. You don't even know it, and I used to not even know it. Most of the

time you get in your own way, and you trip over the little things. What you've done is

you have started too many projects all at the same time.

What you are trying to do is you are trying to build your acquisitions, you're

trying to raise money, you're trying to hire contractors, you're trying to buy materials,

you're trying to get your listing systems in place, and you're trying to stage properties

yourself, and you're trying to take pictures, and you're trying to screen tenants, and you're

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trying to fill your rentals. You are trying to do everything, and you have too many

projects going at the same time. You become a slave to the eight and ten and twelve and

fourteen hour day. You never get anything accomplished.

Go back to the time blocking concept here. I don't want you to start a bunch of

projects all at the same time. I want you to build systematically on your business. If you

are already in this business and doing it at some level of success, then what I want you to

do is I want you to go back and revamp and go re-through and re-tool your business and

build it from the foundation up one system at a time.

I don't want you to go and try to build four and five systems at the same time. I

want you to build one system; I want you to get it done; and then I want you to move on

to the next system and get it done; and then move on to the next system and get it done.

Let's look at the timeline of this for a second. Let's say for example that one of the

systems you want to build or need to build is improving your marketing systems. Let's

say what you need to do is you need to work on building an acquisitions team. You need

to work on automating your marketing systems. You need to put all of the systems in

place that drive the upfront engine of your real estate investing business. That is the

"we've got to find great deals" part of the business.

So let's say that it's going to take you three weeks to get that system put together,

figured out, dialed in, and operating. Now, let's say that you are also at the same time

trying to work on getting a good contractor on board, finding materials, prices, making

sure that when it comes to the rehabbing side of the business that you're ready to go. So

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you are working on the construction aspects of it. You are thinking about what does my

scope of work need to look like; how do I need to put my lean waivers together for my

contractors; what is an appropriate payment schedule; what is a good schedule for a

timeline on a construction project. You are asking all of these questions. That's the

second system.

Let's say the other system is raising private money, setting up investor meetings,

closing the transactions, working with them to collect funds, putting the paperwork

together to protect not only you but also them, and working with the title companies and

the attorneys that might be involved in that process. Let's say each of these systems is

going to take you three weeks to accomplish. If you try to do all three of those things at

the same time, none of them are going to get done for nine weeks. You are going to be

over two months from today before any one of those systems gets up and running.

Here's what I want you to do. I want

you to attack one system at a time. If you

attack the acquisition system and get that

going, you will have that up and running

and ready to go in three weeks. Then, you

attack the money side of the system, and

you'll have that up and running and ready to go. And then, you attack the other systems.

So the key is, don't try to do too many things at one time. Focus your efforts; block

your time; and get projects done. People tend to be the masters of starting things and

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never finishing. That's just human nature. It's easy to start and be busy, but the

opportunity cost of that inefficiency is huge. It's enormous. Take these things to stock,

because they really do impact your real estate investing business.

Let's ask the question: what would happen if you did less in your business

because you were more efficient?

What would happen if you did less? What if you just stepped back, stopped doing

certain things, and frankly just did less? Here's the reality. There is never going to be a

time where there is less on your plate. I know that from my life. Every day I have more

on my plate; I have more to do; I have more things that are coming to me and hitting me.

There is never going to be a time that you have less on your plate. What happens if you

just do less?

Well, if you are focusing and doing less of the right thing, you are going to watch

your income go up. You are not going to be doing less of the productive things. You are

going to be doing fewer time killers; you are going to be doing more efficiently the

productive things. Your mind is going to be sharper. Your body is going to be fresher.

You are going to say quickly no to the inefficiencies, and you are going to say quickly

yes to the efficiencies. You are going to watch your ability to trade your time and your

efforts for significantly more dollars. That's what we're talking about. We're talking about

trading that time up on an hourly rate basis.

I will give you just a couple of my main recommendations on how you can do

this. You know, you may be thinking this is just great. This is a lot of philosophy and

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theory of time management. You thought we were going to be talking about a real estate

investing topic in this chapter, and this is boring you. I'm telling you the truth, if you read

through the last three chapters, and if you grasped what was talked about there, and if you

pay attention to this chapter, all of the students that I have, all of the people that I train

and the people that I do business and life with, when I take stock of where they are and I

help them get to that next level of success in real estate investing, this is one of the most

critical things that we hammer on all the time. It's being efficient.

Here are three things that are big:

1. Set up uninterrupted blocks of time and

work on the high-dollar activities.

2. Turn off your cell phone, and turn off your email. Unplug yourself from

distraction. That has to be a conscious decision that you make to unplug

yourself from distraction. If you don't do it, I guarantee you are not going

to get to that level of success that you want in this business. You've got to

unplug yourself from distractions.

3. Once you have got your goals and your blocks of time and your high-

dollar value activities identified. You've unplugged yourself, so you don't

have the distractions. You've got the time to do it. Sit down; pull the

trigger; make it happen. There are no excuses for not doing something

once you've done those first two steps. You've got to take action.

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The biggest mistake that most people make is that they educate themselves, they

position themselves to do something, and they never take action with it. Why? Because

life gets in the way, and it has been a long day, and it's easier to just go home, plop down

on the couch, grab the remote control, and go channel surfing. Honestly, that's why most

people that have the desire to do better, don't.

The studies and the reports and the things that you read and you look at on the

wealthiest people in America or the wealthiest people in the world, quite frankly, what

are they doing?

• They are always absorbing more information.

• They are always trying to be as efficient as possible.

These people soak up as much of their surroundings as possible and learn from

everywhere that they are and what they are doing constantly. A great way to do that in

Colorado is through the Colorado Property Investors Association that I run. It's a monthly

real estate investor's education event where people come together. They network; there is

a like-mindedness; there is access to resources; and people, we've done a good job I think

here with COPIA designing a venue where people really have a let's help each other out

and make more money environment.

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No matter where you are across the country, that's what I want you to do. I want

you to seek out those opportunities to put yourself with like-minded individuals and soak

up what they have to offer and learn and share. You know, get involved with those types

of organizations. Find the right ones for you, and get out there, and be with them, and get

involved.

Take stock of where you're spending your time. If you're not doing those things, if

you're not going out to real estate investor meetings, and if you're not in the mix with

others, if you're kind of feeling like you're the Lone Ranger out there and you're by

yourself, seek out the places that you can go and connect with and hook up with other

people. That was instrumental in my real estate investing business over the years. If for

nothing else, it motivates you to take action again. It motivates you at least once a month

to get out there and do something and make some things happen.

I'll give you a little tool tip that I like. It's a pretty neat little deal, and it's a service

that allows you to stop checking your voicemail on your cell phone. Would you like to do

that? I know that when I first heard about this service I certainly raised my hand. What do

you find yourself doing? You find yourself driving down the road and hopefully not

swerving through lanes of traffic, but you find yourself checking your voicemail two,

three, four, five times a day.

Somebody calls; you're busy. It goes to voicemail. They leave a message. It

beeps. It shows you have a voicemail. What do you do? It eats you. You can't not check

the voicemail. So you spend two, three, four, five minutes. You check the voicemail. You

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take the notes. You call them back. Well, you do that five times a day, and you've just

wasted 25 minutes. You do it ten times a day, and you've wasted almost an hour of

productivity through an eight or a ten hour day. That's an enormous amount of time to be

wasting.

The tip I have for you is a service called PhoneTag.com. It's a service that will

automatically check your voicemail. It will download your voicemail. There are a couple

of different options with it. You can set it up, or at least you used to be able to. I don't do

this, but you could actually have them record the voicemail into an MP3 file and email it

to you so you can listen to it on your computer. Or what I like is just having it

transcribed.

They check the voicemail; they transcribe

the message; they send me a text email message

of who called, from what phone number, what

was the message that was left, and a callback

number. So what I've got is a very efficient system of phone call follow up. Now, I just

hate being that accessible, so sometimes I don't even use that service, because quite

frankly it's just kind of a pain. People that I want to get a hold of me (no offense) will

know how to get a hold of me. If their name pops up on my caller ID, because I have

their contact information plugged into my phone, I'll answer the phone if I haven't

blocked out that segment of time. If not, I will let it go to voicemail, and we'll deal with it

later.

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People that really need to get a hold of me will figure out how. If they don't need

to get a hold of me, they try calling, they don't get me that first time. Guess what? If they

don't call back, it's probably not a fire that I need to worry and be distracted with anyway.

Remember that. When I stop checking my voicemail and stop being accessible and

unplugged my cell from this instant accessibility of our culture today, the inevitable fires

in my life and in my day that used to always happen, quite frankly stopped happening.

People figure it out. If they can't get a hold of you and need you to make a decision right

now, right there, people are generally pretty good at solving problems if you give them

the flexibility to do it.

We've talked about time management, efficiencies, the 80/20 rule, doing the right

things in your business for the goal of taking your income to the next level, taking your

hourly time spent working and increasing its return to you in the form of dollars and cents

by thousands of dollars per hour. That's the goal is to get you to that level of income and

efficiency in your business.

Now, in the last chapter I gave out a website. Take out a pen and a piece of paper,

because I want you to write this website down. It's called

www.DistressedPropertyDashboard.com.

I've been in this business for around ten years. I've spent a lot of time doing stupid

things. I've spent a lot of time doing smart things. I figured out the things that you need to

do in your real estate investing business to be successful. I want you to get paid every

week. I don't want you to wait thirty, sixty, ninety days between paychecks. I don't want

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you to think that you're going to have a $30,000 profit and end up with a $10,000 profit

because it took longer, there were mistakes made; you paid too much, all the things that

we know happen in this real estate investing business.

The key is, if you can get to a spot where your cash flow becomes consistent, any

successful business has consistency in their cash flow. It is not feast and famine. It's not

we've ramped up, and we've got a big payday today, and now we've got to wait four

months. That's not a business. That might make you pretty good money over the course

of the year, but you have got to figure out what to do in your business to create consistent

cash flow and income strains.

If you go to that website, www.DistressedPropertyDashboard.com, it's a product

that I'm putting together and will be releasing this fall that takes you step by step through

the critical, high-profit-center areas of your business from setting up your acquisitions

and marketing systems to exactly how to send out postcards and mailers and where to

buy lists. How do you find the best deals? Where are the motivated sellers? You know,

we like to use that phrase. Where are they? How do you find them? What's the best

message to put out to them in order to come back? How do you dominate the REO

market? How do you get your deals accepted over somebody else's? How do you write

your offers, make your offers, and efficiently get deals? All the way from acquisitions

through raising private money and understanding the concepts of how to do that

efficiently, all the way to your exit strategy and getting out with profits, but getting paid

at every single income-possible point along the way.

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The Distressed Property Dashboard is going to be a real estate investor's

educational step-by-step guide, so that you wake up on a Monday morning, and you put

your time, energy, and effort into the right areas of the business. As we talked about in

this chapter, if you put your time, energy, and effort into the wrong areas of the business,

you are going to leave thousands and thousands of dollars a month on the table without

even knowing it. You're busy; you're working hard; you're making things happen; but

you're not doing the right things. So those things that are happening are not resulting in

the level of income that you really desire out of real estate investing.

Here's what we have at the Distressed Property Dashboard Site. If you go out

there and take a look at it, what you are going to see is that I have an early release sign up

group that is available right now. Here's what that means. If you go out and claim your

spot in the early release group today, when the product releases, I'm going to do a couple

of things for you.

Number one, you are going to be the first to know when it releases. I'm going to

give you a head start over everybody else by at least twenty-four hours. I'm going to let

you know in advance that it's coming. So you are going to have the opportunity to be the

first to know, jump in there, and take advantage of it first.

Why is that important? For a couple of reasons. By being in the early release

group, you are going to have a discounted price. You are going to be able to buy it at a

discount for spending the time educating yourself through this e-book. You are also going

to have the opportunity that there are only going to be 300 licenses to the Distressed

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Property Dashboard released across the country. So a little bit of a time jump on some of

the other competition that exists out there can be pretty advantageous. There are going to

be 300 licenses available for this dashboard that is going to take you step by step and

have you put your time, energy, and effort into the most productive, profitable parts of

this business. Believe me, I know what they are. I've not only done them in my business,

but I've helped a lot of other people do them in their business.

Finally, one of the biggest things that I'm always asked to do is to consistently

keep these educational venues going and touch on specifically detailed topics of real

estate investing. This chapter was really on time management and increasing your per-

hour income and doing those kinds of things. If you go out to

www.DistressedPropertyDashboard.com and check out the early release group, as part of

the early release group, if you are one of the folks that grabs the dashboard when it goes

live, the first 50 people that do that I'm going to give them a free three-month pass into

the Distressed Property Dashboard Mastermind Club.

Now, that sounds cheesy. It sounds like marketing, and that's exactly why I called

it that. I mean, you know, it is what it is. It sounds really corny and cheesy to me, too, but

you know what? It kind of sounds cool, doesn't it? The Distressed Property Dashboard

Mastermind Club. I kind of liked it. So I went with it. Maybe it sounds cheesy. That's

okay.

What it is going to be is basically a membership group of people that are going to

get the same quality of education that we have been hitting over the last number of

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sessions. We are going to keep this going. I have gotten so much incredibly positive

feedback from people about the training that we have provided over the last sessions.

Literally, people have begged me to keep it going. So I'm going to do that. I'm going to

keep it going, because I enjoy it. You know, it feels good to get the feedback that I've

gotten. I think that I've got a lot more that I can share.

We've got a turbulent market. We don't know what's going to happen next. I'm in

a fortunate and unique spot in my business that I have access to people and information

and things that a lot of real estate investors don't have access to. What that does for me is

it allows me to dive down deep inside other people, other very successful people's minds

and brains. You know, people with a lot more experience in life and in real estate

investing and in business than me. It allows me to pick their brains. It allows me to plan

the strategies of my business. I don't want people to get caught off guard when things

happen.

When things happen in your real estate investing business, if you are in tune with

what's happening in the marketplace, and if you are thinking ahead, and that's what I do

all the time. We are always thinking ahead with our business. As part of the Distressed

Property Dashboard Mastermind Club, you are going to join us in thinking ahead in your

business. You are never going to get caught off guard. There are going to be things that

come. There are going to be waves that come. There are going to be nudges off course

here and there. But you are going to have access to this mastermind group that is going to

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keep you focused and on track and in tune with where you need to be in your business,

not only today, but tomorrow, and in the future.

Go out there right now. Get signed up for the early release group on

www.DistressedPropertyDashboard.com, so when this product goes live, you are the first

to know. You can get one of the 300 licenses that are going to be available for across the

country. You can put your time into the most productive parts and the most profitable

aspects of your business. You can get in on the Distressed Property Dashboard

Mastermind Club, and you can take your business to an entirely new and profitable level.

I hope you have gotten a lot

of information from this book. I

hope you will take stock in what

was said in these chapters. If you

will, you will impact your

business. If you brush off this last

chapter as not a technical training,

if you brush it off as, hey, that was

great, rah-rah kind of stuff, you're missing the boat. That's as frank as I can say it. If you

don't figure out how to increase your per-hour rate, you're missing the boat.

I hope you got value out of this. I hope you will take notes on this and sit back,

think about it and then go out to the Distressed Property Dashboard and get registered, so

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that you can learn how to put step-by-step online the most productive things you need to

be doing in your business on a day-by-day basis.

Here's to your success as a real estate investor!