For those I mentor, I'm more than willing to spend the time and energy to help you succeed and not expect payment until you make money, but I won't do all the work for you. Because I now have over 30 students, I have to standardize my system a little.
NEW CASH BUYER SYSTEM
I work specific regions of the US and only avoid some areas for economic reasons. If you want to do it my way and make sure we don't step on each other's toes with the same materials and procedures, make sure we discuss where you want to invest and why. You will have to do #5 in the FEES section below. If you do it your own way, no problem.
I work two sides of the business. There is a HUGE market in today's economy that is dreamland for smart investors. That market is between the lowest priced housing and the people that want to live off the street. Putting it more descriptively, it's between the houses banks will almost give away to get out of their inventory and people that can't afford or qualify to buy a home. In almost any economy, the middle man is who stays safe and makes money.
For too many years fools have believed that the way to invest was to buy at any price and sell to a bigger sucker stupid enough to pay a higher price - before the carrying costs ate you alive, that is. That's what the last several years real estate market was driven by. The truth is that an investment is supposed to be self supporting and hopefully make additional profit over time.
There are three ways to make money in any situation. 1. Buy low, sell high; 2. Buy low, rent above ongoing cost; and 3. combine the two to buy low, rent above cost and sell to another person at a price that they can safely handle but still gives you a profit. Today, #1 is stronger than ever if you know what, where and how to do it safely and right. #2 is possible but will quickly use up your capital and end your investing. #3 is the safe long term net you maintain on all investments in case they don't sell. It's keeps you safe, provides an ongoing additional income and allows you to grow your spendable equity for more property.
Because of the changed market (down and BAD!!) I love it!!! there are opportunities opening up now that weren't available just a few years ago. I've moved from going to property owners to going to banks for their foreclosed properties. This gives my students and me the ability to buy properties for as little as 10% to 30% of current Fair Market Value. This opens up all kinds of new avenues of income. The ability to flip wholesale is tremendous. The opportunity to create a positive cash flow property for holding is wonderful! And guess what? It doesn't take any cash of your own to do it. You don't even need any credit to make money in today's market. And it's a lot easier than you would imagine, because you'll be doing things different than the crowd.
Let me give you an example.
The reality is the entire process, to do on your own, takes about 6 months to get to your first deal. Then another 3 months to get cash out so you can do it again and again. I've set up my training system to help starters begin investing in about 1 week on a variation of the standard cooperative basis I use for straight investors. This gives you a chance to begin making money quickly and begin to build your own system on your own through my direction. This CoopInvesting is actually more for people that want to invest but don't have or want to spend the time and effort it takes to actually do deals. They can sit back and be ready to take over on a profitable basis when I'm done and it's ready to take the profit out. No work + some cash and credit = profit without work or headaches in the future.
HOW DOES THIS APPLY TO YOU
Let's say you can access through your own money, credit cards, friends and family about $10,000. You feel uncomfortable and don't want it to drag out too long. Is 6 months acceptable? (We're talking real world here.) A property is available for $15,000 and the rehab to make it pretty will cost about $35,000. Houses in that neighborhood are being rented by professional management companies for $700 to $850 per month. Let's be conservative and say you want to safely rent at the bottom of the market - $650. That way you feel safe in being able to find a renter. After all, the house will be pretty, not a junker.
Your costs of acquisition will be $50,000. Your monthly income will be $650. Your expected monthly expenses will be for management ($65) + insurance ($60) + property taxes ($50) + maintenance ($50) for a cost of $225. That leaves $425 per month. That's enough to cover a 30-yr mortgage at 7% of $65,000 ($432.45 per month). If you run an income analysis for Fair Market Value (FMV) you would consider a buyer bringing 20% down and adding it to what they could cover in a mortgage ($65,000) + $21,250 (20% of the purchase price) = $81,250 as the FMV.
You will use a hard money lender that is more concerned about the property value than your credit (they do check credit, though) who will lend 60% to 70% of FMV ($48,750 to $56,875) at a high interest rate (just think of it as cost of business) and require you to pay at least 10% of the loan amount from your own funds.
At $48,750 (60%) it will cost you about $5,000 down plus about $2,000 in closing costs to do this deal. The hard money lender is only loaning you $43,750. Once purchased, rehabbed and rented at $650 you will convert the hard money to conventional financing at a lower interest rate with a $65,000 new mortgage paid by the property. That pays off the $43,750 hard money loan, pays you back the $7,000 you spent, borrowed or finagled from others and puts $65,000 (loan) - $50,750 (payoffs) = $14,250 profit as tax free cash of other peoples money in your pocket. That's a 200% profit in about 6 months. If it rents for $800 you get an additional $150 positive cash flow every month. If you find an investor wanting turn key deals (no work on their part) and you can pass a professionally managed, recently rehabbed, pretty property to him or her, they can buy the $81,250 house for $70,000 wholesale from you (they get a $65,000 loan and pay you $6,000 down) and you end up pocketing an additional $5,000 profit. Again, if the rent is established at $800 per month (covers an $85,000 loan) the FMV of the house is increased to $106,250 and you can sell it wholesale for $90,000 and you pocket a respectable $40,000 for your efforts.
This is what I do day in and day out.
The key to this is working in the right markets where the numbers work out profitably, making sure you have a highly qualified professional team in that local area to handle everything and turn the worries over to them. It's the finding, development and coordination of that ground team that takes about 6 months. I already have it ready if you want to work in areas I'm currently in. Consider this. Do a few deals with me while you're developing your ground team in an area you want to invest in. When you're ready, you'll have the cash you need without going to family, friends, or credit cards.
Let me remind you, I don't charge you a dime until you actually make money. However, if your are coop investing with me, you will be providing credit, cash, one or both, and you still won't pay me until the deal is done except for the cash to do the deal if that's what you are providing.
On the other hand, if what you want is a mentor to teach you each detailed step of the process so you can do it over and over again and again for more income the section below applies to you.
First, a student has to ask to be a student. Not until they send me an e-mail asking that I mentor them will I go much beyond the basics. By asking me to mentor you, you're agreeing to points 1 through 4 below. If you want to take advantage of #5 you must do so specifically.
To make this a little simpler here's an understanding of what you can learn and how many properties it should be worth paying me on. If you already believe you know all you need to know on a particular topic and won't bother me with questions on that topic, just eliminate that one from the list. Click on the "Buyer" below to go to the sign up form.
Here's a list of the topics we will cover to the point where you can use them effectively, profitably and on your own with minimal or no help necessary. I'll always be available, however if you run into a question or problem.
Each one of the above topics will cost you one property profit split at 50/50 up to a maximum to me of $10,000. You decide what you believe you already know and don't need help with and what you do want help with. The form you fill out will let you indicate which topics you want help with and which ones you already know. For instance, if you already have done a few deals on your own and have a business structure you feel comfortable with, you might decide on #2, 3, 5, and 6 are all you need and may say 4 properties is all we need to agree on. After our discussion by phone that may change up or down a little based on how you impress me with your current knowledge. If you're a rank beginner, but only want to make cash profit deals (buy and sell = flip) and don't care about multifamily units, tax planning, property management or land trusts it may be 6 or 7 properties we finally agree on. Click on the "buyer" and complete the form and we'll get together to see how I can help you.
We will have to come to an agreement on how many properties we will work together on. It must be by e-mail or in writing. The sole purpose of that is simply to put it down so we don't forget it in the future. It's not a contract, simply a documentation of what we expect from each other. One thing I will tell you now. I couldn't, even if I wanted to, try to sue you over such a document or agreement. Besides, I work on trust. I've had a few students I found out did a deal without paying me and I simple refused to work with them any more. It's not worth the negative energy to continue beyond that.
Dr. Ken Rich
P.S. You've read this far (a lot to handle) and you're still interested but you don't have any cash, your credit is in the 200's and you can't wait 3 to 6 months to make any money. How would you like to make a few thousand dollars within a couple of weeks? and then do it again and again until you make money from the actual investing. Ask me about this when we talk and I'll explain everything.
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