Sophisticated Real Estate Investing: The Core Strategies, Tools & Mindset

1. 00 Real Estate Investing Promo: Hey, how's it going? My name is Alex Cora Manis. I'm an investor from Toronto, Canada. You've got to know something. Right now, 95% of the wealth in North America is controlled by 5% of the population. This stinks. What is it that they know that you don't know? For a majority of those people, those that were not born with a silver spoon in the mouth, they had their success stories rooted in real estate investment. This course is for anyone who's looking to get their start in real estate investing. It's more or less kind of the introductory scope of all things that you're going to encounter as a real estate investor. So we give you a little bit of an introduction to start, we're gonna get into strategies. We're gonna get into techniques. We're gonna get into the spread sheets a little bit with some examples to go with some terms in there is awesome. Calculators decide whether or not properties are worth investigating. We've got some indications on which markets will turn out to be better markets free to invest in others, strategies that all the millionaire investors used to make big bucks in real estate. We've also included the fundamental techniques you need to know when you're negotiating. These deals are aim is to get you from the position of not knowing anything being exposed to the right kind of attitudes. The right kind of terms were kind of strategies that you can build up from after this course will have everything that you need to know to get started. I want thank you for checking this course up. Look forward to seeing you in there, everyone. 2. 01 Introduction: uh, hello and welcome to the course. My name is Alex Cora Manis. I am a real estate investor from Toronto, Ontario, Canada. Um, first thing you should do is congratulate yourself. You've invested in yourself. This is apparently a very difficult thing to do. How many people do it? It's exceptional. What you've done by investing in yourself is effectively begun. The digging into what? What Earl Nightingale would call a solid vein of gold. Your mind is a terrific resource. It's you own it free and clear you. The more information you pack into it, the more you invest in yourself, the more that you could dig out and it last for the rest of your life. So we're gonna get you start on that with this course. What's involved here is it's it's It's more or less kind of the introductory scope of all things that you're going to encounter as a real estate investor. So we give you a little bit of of an introduction to start, we're gonna get into some strategies. We're gonna get into some techniques, we're gonna get into the spread sheets a little bit. We're going some examples to go with we're going to give you a kind of Ah, the entire what I wish I had from someone who could tell me what to expect from this whole journey the strategies involved and had how to execute on those, Um, the real value, I think in this course is being able to see things kind of at a glance and then taking the strategy that works for you. That way we've outlined it, trying it out and seeing what sticks after this course will have everything that you need to know to get started. You really will never have enough knowledge, especially on a subject like real estate. Investing is so huge, so massive, who will never be one book one course, one audio program is just never going to be enough. But what we're gonna do here, our aim is to get you from a position of not knowing anything to being exposed to the right kind of attitudes, the right kind of terms, what kind of strategies that you can build up from? We're gonna provide ah lot of resources for you that you can use to develop the skill of being a real estate. Investors from the spreadsheets and some of the the ways to phrase your contracts and some tips on how to negotiate. We're gonna get that all prepared for you at an introductory level, and we're going to set up a path for you to follow that you'll be ableto use by leveraging other sources out there, continue your education and eventually becoming a success and real estate investing. 3. 02 3 Main Components of Real Estate Investing: uh, So if I were Teoh, try to capture investing particular real estate investing. There's three main components and they all start with our So it's kind of an easy way to remember it. The first is the research. You gotta know. First of all, how to invest. You gotta research being an investor. What that takes, what that's about. You gotta invest in certain markets and you got investing. Certain properties seem to research those markets and research those properties in those areas. So research for the first are of the of the TRIA. The second is relationships, relationships, air, so, so important. Robert Kiyosaki says your net worth is your network and it's absolutely true. The best deals, the most efficient deals I got is just through relationships. People who want to help me succeed because I'm helping them 16. The last are of the trio is reframing or, in other words, negotiation. Negotiation is everything. It's gonna be the way that you make money in this business. So those three R's are pretty much how you would capture real estate investing the three main components of it. Um, but more broadly, uh, what kind of a philosophy kind of perspective. Does a real estate investor have a real estate investor? Invest money because they want to make money. They want to secure the capital they put in their capital. You put in there is intended to bring out more capital. In the end, that's what a real estate investor is. This may seem obvious to you. It's kind of, ah, trivial point. But a lot of people, at least indirectly reference real estate investing as flipping. Uh, you just sort of you slap some paint on it, you put on the market, you flip. It takes two seconds, get 10 different mortgages on it. Obviously, in the States we know that this happened. It was it was kind of a weird thing that happened, required a lot anomalies. Teoh fit together at once. But the problem with that situation was the idea that anybody could be an investor. All you gotta do is buy a property, wait for it. Appreciate this is gambling. The easiest way to say it is gambling. There's just there's no due diligence. There's no strategy. More importantly, no exit strategy. There's just let's buy and figure it out. That's not what a real estate investor is. There's a lot of examples of this in history. It's actually kind of a natural feature, it seems of, ah, of just the human scenario. The human situation there is the South Sea bubble. There is tulip mania, Um, and as a matter of fact, the South Sea bubble. I don't get too much in the history here, but, uh, Sir Isaac Newton probably would consider to be a smart guy, he said, uh, he can calculate the movement of the stars, but you can't calculate the madness of men. He lost a lot of money gambling, essentially on stocks that were way overvalued. Um, it's the kind of mistake that you definitely want to avoid in real estate, especially getting started. If you don't know what you're doing. If you follow that model, you'll get slaughtered. There's people out there waiting for someone like you to come along. Um, the education part of it is so important, and that takes time. So just to try and capture it really quickly, what investor does is an investor controls assets. He doesn't gamble or she doesn't gamble. She she knows what she's doing when she's getting into an investment kind of like driving a car is a great analogy again. From barbecue sake, I'm a bit of a fan of his. I don't want to come across this kind of being, you know, only in one camp. He is terrific. There's lots of fantastic authors out there, lots of fantastic teachers. But I really like Kiyosaki style for being so simple. So here's his example. He talks about a car, right? So a lot of people say, Well, investing is risky. I don't want to do it because it's too much risk. Risk is unavoidable. You get up at you, get about a bed in the morning. You could risk stuff in your toe. You probably drove toe work yesterday or took the bus. There's a ton of risk in that People die by taking a bus hit toe work. It can happen. There's risk. Don't worry about risk. Question is, what can you control? That's what investor focuses on. They're trying to maximize their success there, the return and minimize risk through control through the effective strategies through the terms they put into a deal. This is the kind of person that you want to learn to become and the kind of person that hopefully I'll get you started on at the end of this course. 4. 03 Why Invest in Real Estate : uh, there's all kinds of opportunities out there. There's there's multilevel marketing, which some people call pyramid schemes people don't know they're talking about, because they would probably have a lot of money if they think you the power of that kind isn't anyway. That's one kind of opportunity. Great one to, um, not that I'm in one, but I encourage if that's your thing, there's stocks. Everybody knows about stocks, so it would be paper assets. You could make money, all kinds of ways. Really. Actually, the best way you could probably make money, not even through real estate will be to have some kind of major business idea like Amazon. You put it online. It runs by itself. It's the minimal initial investment and progress your life. You're a billionaire like like Pezzo. Um, But why the big thing about real estate? It's gonna take a ton of time, a ton of commitment, a ton of effort from you because, as you know, nothing happens, says there ain't no free lunch. Doesn't happen on its own, doesn't happen automatically. You're about to invest and embark on this journey. So why should you do it? Why is it so important. Let's just talk about first of all, what real estate is. It's tangible. It's solid. It's something that you Congar 02 Uh, why is it important? Because it's something that you control. There's There's so many avenues involved with that Real estate is, uh for the last 30 years has gone up on a consistent average. As faras appreciation goes, 4.5% at least in Canada and states, could be between four and 5%. The rate of inflation eyes 3%. Historically, a little, very, sometimes lower, sometimes higher is high seven or eight. But, um, as an asset class, you've got something that people can go to. It's a physical thing. They need it. They need to put their head down. At the end of the day, it's something that you can change. You can change the purpose of it. You can change the use of it. You can get in there and make improvements to it. You could let it just sit. And like we said, over time, it's better to park your money in based on logic, I just gave you. It's better to park your money in a property that in the savings account because the savings account earns you zero interest. That means you're actually losing money and actually again. Kiyosaki says savers are losers precisely for that point. Your money is being printed up by a power that you have no control over. I mean, presumably you can vote doesn't really seem to do much. Um, you can vote, but you ultimately today have no say over the paper is gonna be devalued whether you like it or not. You need to park it in something that's gonna preserved value and hopefully increase it for you. Real estate is one having you again with with that side of the control aspect, you've got options. There's lots of different ways that you can get into and get out of a property you can. You can buy it to sell it. So you fix and flip it. You can buy it to rent it. You can buy it to live in it and then sell and avoid losing money in taxes. Um, you can change the use of it. You can rent to own it. There's all kinds of things that you can do with that asset class. But most importantly, uh, like Will Rogers said famously, by land, we're not making any more of it. This is a asset class that well, I mean, there's gonna be lots of condos and whatever, but land itself is a scarce Well, it's a limited resource. It's something that you want to tap into and forget about over time, it becomes more valuable to you, really. The two main, uh, reasons to invest in real estate. The two biggest advantages are tax benefits and leverage. I'm gonna take leverage first here. We're gonna start with that because it's a really key concept. It's a little bit tricky to get your head around. But there was a ah famous mathematician, our committees who said You give me a long enough lever and fulcrum on which to place it and I can move mountains. Something like that kind of butchered the expression. But the thing is that it may seem an indomitable task to move mountain. But if he has a long enough that the principle of math is if he has a long enough lever and a point in which to place it, he can leverage the length of that lever and maximize the effort he's putting into it are sorry. Minimize the efforts bring into and maximizing the result. That principle of leverage is so key in this business because, unlike stocks, for instance, if you want to compare asset classes, you can borrow money to purchase stocks a little bit dangerous because it's, ah, highly volatile asset class unless you have a strategy of buying for long term. But it's volatile. So if you borrow money ah, and you lose it, you not only do you have the interest, no fees associated with it, but how are you ever going to recover that? In addition, the fact the bank won't go beyond 50% borrowing power, so you can't kind of borrow again and then get your capped. At that point with real estate, however, you can borrow up Teoh for 65% toe, 80% to 90% some cases, 95% in states, even crazier. It's like 97 98%. It's incredibly high the amount of leverage you have on this deal, because what that translates to for the average person is a lot of people say, you know, I don't have money to get into real estate. You don't need a ton of money. The rest of it comes from other sources. You want to borrow other people's money. It's, uh, OPM. That's what millionaire real estate investors do, even if they have lots of money. The question isn't about how much money, how much can you do? And the question is, how much can you borrow so you can turn that over into more deals? You can't get the kind of leverage in any other business that you can with real estate, apart from maybe an MLM. But faras borrowing power goes, You can get hundreds of thousands of dollars, and the bank is willing to do this because they know compared to an asset class like paper stocks, there's far less risk. It's it's more reliable. There's security in it, So that's that concept of leverage. The second thing we wanted to address here is the tax benefits is another big perked investing in the asset class that is real estate. So if you decide to go the buy and hold route with your real estate investing, the income generated from the rental units is not subject to the same kind of tax that you would get with self employed income. If you wanna take some losses, if your property isn't producing the kind of coming one you can take out, there's another benefit. You could take out a bit of that loss in the form depreciation, so you purchase a property and typically, like we just mentioned earlier, appreciates over time. Some markets they appreciate 2030% cause of crazy markets. Other markets are usually more average five or six. But there is that appreciation that growth, but the same time there's an opposite effect, which is depreciation, because the building over time is actually on the three accounting ledger of the C. R A or the I. R. S and states on their ledger, it's losing value because it's getting older. So you get to offset that while getting the benefit of the appreciation on your property. It's kind of double ending the income there. Another great benefit. If you don't want to pay taxes at all, just live in the property. If you live in the property, you own the property, you sell it. That's not business income. That's your personal property income. So, as an example here where I'm from. Toronto markets absolutely insane if you were to. But let's say a $5000 property goes up to $700,000 in, like I don't three days, which tends to here, that's 2000 minus your costs of associate with selling and purchase. That's yours. Tax free. Another way to do the tax free thing without actually living in the property is to refinance. If you have a property that you get under market, right, you get alone on that. You put your money into it. You do a little bit too it to fix it up or you change the purpose of it. You get another appraisal in. Now that property is worth more. You've done a bit of a value. Add there, so you force the appreciation there. What you do is you refinance, so you get another loan on that property. A new loner extend the one you've already got. And now you're able to borrow that extra buffer that you've earned by doing those renovations so that let's say you pull out, you buy a property for $500,000 again, uh, you fix it up and now it's It's sexy. It's $700,000. You get your 80% of 9% loan river. Now you've got the extra 100 couple $100,000 that you've pulled out of the property, which is not taxable because it's not income. It's a mortgage. You have to pay interest on that mortgage, of course, but so I'm not suggesting you do that to go buy a Lamborghini. Um, you obviously want to do it because you want to reinvest. As long as you parked that money into a investment opportunity that produces the income to offset the cost of borrowing. You've got that cash tax free. So just like in Monopoly, you get those greenhouses you treat up to a red hotel. It's the same exact philosophy, the same exact process, and actually, again, I'm gonna talk about Keith sake last. I'm just gonna tell you Advance and he brings up that issue. That's that's what he said. He learned how to invest. Because of that. He played it with his rich dad all the time. That's his philosophy by the greenhouses trailed to read hotel. If you use real estate to your advantage, if you use the leverage that's available to you if you use the tax benefits that are already written in as law. You're not cheating. I'm not saying avoid or dodge taxes. There's just knowing the rules and knowing what's available to you. Tremendous benefits to you with this particular asset class. So that's why I'm so crazy about real estate. So again, just to reiterate, to recapture this, uh, there's three important points touched on there. So number one, you do not need huge sums of money to get in a real estate that works for a lot of people. I think it worked for me. Um, the other vantage tax benefits case so you can use taxes on your side rather than paying out, as you do normally a 20% or 30% of whatever tax bracket you're in. Um, and again, third is options. You've got flexibility. You've got exits. You wanna have options in life. You don't want to get stuck with one thing because life is complicated. Things change all the time. Really? The thing is, and I'm kind of tying it back to risk and address that already, But, um, a lot of people hesitate. Um, you you don't want to go out there guns blazing. You don't want to be cavalier in your attitude or quixotic or whatever the word is but you because you obviously want to do, um your best to avoid or minimize loss or mistakes. But there's a great saying and far enough comes from an agent. But it is still, even though he said it, it's still true and he got from someone else. But, um, don't wait to buy real estate by and wait. Even if the market crashes like, let's go back to the example in the States 2008 even if the market crashes, we're gonna teach you the right way to invest so that if the market goes up or down, it's indifferent to you. If the market crashes, you can still be okay. The reason why people get destroyed in these times because they don't know what they're doing, they panic. They sell at the worst possible time, but they have to sell because they didn't structure to deal properly. So we're in teacher, huh? Avoid on any up in that kind of snow and actually benefiting from it. As time ticks away, the less opportunity gonna have just doesn't matter of your dollar being devalued. Don't keep in the mattress. Don't keep it in a savings account. Do something with it and do it sooner rather than later. Everybody I've ever talked to that has even botches one property again and again. And this is anecdotal evidence. But I'm telling you, they say I wish I had bought sooner. I wish I had bought more. And this might seem strange to you, but a lot of also say I wish I never sold. Um, the key free, remember, is that the action taking is gonna benefit you once you know the right way to do it. And actually, an important point on that is the whole thing about investing. You can learn as much as you want. You don't want to over learn. You don't want to get in that trap, which was known in the fuel industry as analysis paralysis. Don't think that I don't have enough information after this course, you will have enough information. You're not going to know anything. Really, That's OK. It takes time like anything else. But you'll know enough that you could start doing the things to build up the other side. So the knowledge component. But you also need this skill component. You cannot read a book. Uh, babies don't read books and how to walk. What? What babies do they fail, like 1000 times? When's the last time you tried something and failed 1000 times and you kept going. You gotta be like the baby you got Fall. You're gonna make your mistakes inevitable. You gotta fall. But that part is the process of learning. You make those mistakes that you can adjust, correct. Go Another route that my experience has shown just just by me going through this guy. I know where some of your at. I mean, it's scary. And you kind of think why? I don't know enough. I can't get started. You don't do that. You wanna get a little bit of knowledge and then execute on it right away. And if you make the stakes doesn't matter, because there's kind of a scaffolding effect that happens. You set up with one leg. That's the knowledge. But you can't just go up with knowledge. You gotta set the other leg. You got to get a little bit experience. Get that skill developed. All right then, from that skill, you learned some stuff. That's more knowledge. Then you learn some or you read more books. You go out due skill again. It's scaffolds. It works together like that. Nibble a bit. Execute, learn and earn. That's really the key. So again, the enology going back to key sake's analogy of driving a car. What's so important about the control aspect is driving a car is risky. Um, it's risky because there's a lot of variables at play. You can never control all the variables. There's gonna be some element of risk, but you can control a lot of it. You can minimize the risk if you get into a car. Would it make any sense to drive without a steering wheel? What if you take off the brakes? But if you take off the seatbelt? Yeah, that's really risky. You do not want to do that. I do not. I do not suggest doing that for driving car or for getting into a NASA class, and I said a vehicle for income. So as a vehicle, uh, this asset class real estate before we can get in tow, operating before we could start driving this vehicle before I can give you the actual tools of the trade. There are 11 chief principles that you wanna follow throughout your investment career. I don't know if it needs to be said, but you should have a pencil and paper ready because this is really important stuff there, more or less. I'm not too big on, you know, truth or absolute Syrian kind of stuff. There's all kinds of strategies. There's all kinds of different personalities. There's all kinds of stories, but these will be very useful guides there, more or less unalterable or can be applied slightly differently in different scenarios. These are the 11 chief principles that you're gonna wanna keep in your back pocket as you're going through investment career. 5. 04 11 Principles for Investing in Real Estate: Uh, okay, So number one, this is the foundation, actually, for any business you by at wholesale rates said you can sell at retail rates. It sounds obvious, but a lot of people think that, you know, a seller thereafter asking price list of this asking. This is what people are paying. You don't care. That's not how you're gonna make my everybody let people do what they want. They don't have the information you do. They do not have the business that you do when you're in business and real estate. You. The only way to have a marginal profit is if you buy it wholesale or you finance at wholesale rates, which neither be through the bank or through the seller financing. And I'll explain a little bit about that later. But a za long as you structure your deal so that it's a wholesale deal for you, either through terms or through price. Long as you you structure with a wholesale value attached, you can sell it retail, make a profit, or hold it and make a profit on the income. All right, number two, the difference between a speculator and investor, right? You make money on the by. This is a I don't wanna call in absolute, but this is kind of the again the foundation of the business. Right? Um, you don't want to enter into a deal hoping that you're going to make money. That's not why you invest. That's not control. That's tearing off the steering wheel. Don't drive like that. You wouldn't drive like that. Don't invest like that. If you're gonna purchase the property, you got to make money on the by. That means you got your market or the price that you know, more or less for sure that's gonna sell for you got that market in there. You've covered all your costs associated with buying and selling it. You still got a margin of profit. So no matter what, you've made money on the by. That's how you want to secure your properties. This is principal number three. You've heard it said I'm sure over and over again. It's It's a tired saying they always say Realtors, location, location, location to me, another way of phrasing. It's just say, Don't buy Chief, Don't be cheap. Don't be a You could be a slum where if you want certainly I know some people that actually it's much faster way to get high rates of return is by buying these kind of rougher areas rougher properties that rent for very low on. You could make a ton of money if you can get the financing for if you get the deal together in structure, right. But really, uh, what, what, really what a lot of millionaire investors do? What they sort of suggest is. And like everything else, there is this saying everything in moderation. You want to try and hit the sort of middle ground. Actually, in this case, we real estate investing. It's sort of middle upper. Don't buy cheap. If you buy a good property in a good area, you take a little bit less up front, but you're letting your time work for you. You let the value of the property growth because it's an area, it's in demand. You can increase rents, which is really tough to do in a similar situation. People are living there because it's cheap, but that's the whole reason. If you raise the rates, you raise the value of your property. The property is naturally appreciating its in an area. It's wonderful. You've got fewer headaches because you've got great tenants. These are people that want to take care of the property. You may actually even buy it from you. Or you could negotiate a renter. A rental own scenario. Uh, just location. Think of that. First, don't buy. Just based on price number four, this principle might not apply in some strategies, but the underlying rule is you want to buy cash flowing deals. You don't want to buy negative cash flow in deals. You want to get into a situation where you only is the whole reason you got into the investment in first place because you want more of it. Um, you can, obviously by deals that are negative or that are gonna cost a lot of front if you're going to get a high return at the end. But going back to we said earlier, the difference between a speculator and investor If you buy a deal, it should be cash foreign right away. Don't buy the promise and this is you'll see this all time is you start looking at deals. There's always a promise that Oh, this property has so much potential. It's fantastic. It's under market rent. If it's so fantastic, first you tell the agent so fantastic you buy it. I'm not touching. If it could be rented for that, it would be rented for that. There's always a reason why. I mean, why would the owner just thinking, Why were the owner take less money? There's a reason for it. It could be that it's under managed, right, and and maybe you'll find opportunity that way. But you want to buy a cash flowing deal. You want to have some security entering into a deal so you can make changes. And it won't cost you very much for the strategy of buy and hold for now that you're beginning in your career for buying whole strategy by cash flowing property. If you get into that kind of gray area where it's like you have, it's only losing a little bit of money. I mean, that's up to you. But that goes against the principle. The principle is there to protect you. If you do get into that, it's uncharted territories. You might not know how to manage it to turn around. I mean, basically, if you're getting a deal right, it's because the sellers got a problem. You don't want to end up with their problems. So I'll leave it up to you based on what kind of strategy? One employee. And as long as you got your number straight, always do your own numbers. If you see a profit yet, do it. But for buying holds, If you're just getting started by cash from properties, they're out there. You can do it. It's not always gonna be that. You just buy it and casual in. You gotta structure the deal, right? We'll teach you that. But remember that principle? Okay, cash flowing properties. Don't be a negative cash flow position when you get a property. No reason. Number five, be patient. I know you want to get started on. You wanna go out there and make a $1,000,000 in 10 seconds? You probably could do that. I'm not teaching that. What I'm teaching here is be patient. If you go out and buy the wrong type of deal. Ah, deal. That doesn't maybe fit your system. But, you know, like again going. It's the cash for in principle before you know, it's it's, you know, it's it's kind of it's kind of got these problems. But if this happens, if it don't base your investment strategy on what ifs, lots of deals fall apart because their death of 1000 cuts those little what is actually creep up, and it creates problems for you later. Um, be patient. If you end up buying a property that doesn't fit your system, you could end up with if you're buying it because you want to exit out of your job right now, you could end up with two job instead of just one. And the second job carries a lot more stress investing in real estate on a bad deal that will keep you up at night. Avoid that stress. You don't wanna get stressed out, especially the stage of your career. If you're just starting out, be patient by the type of vehicle that you need to get you where you're going. Don't buy it because it's shiny and it looks good. Number six. We touched on a little bit earlier. Net worth equals network. Maybe you're super smart. First time I heard that, I was like what? Uh, I actually you know what a net worth was, but you know what a network is. Is that people in your contacts? Um, when you run into people everywhere, find a way to bring up. I mean, ask them what they're doing. Finally, bring up what you're doing. Network with everybody. I'll give you a great reason why that is. And actually with the benefit of what it means to say, your network is your net worth. The benefit networking is when I bought my first property, my next door neighbor, um, I actually found him. He was more in my line Super super cool guy. Super sweet. But he lived by himself. Hey, immigrated from, uh, I think Czechoslovakia. He, uh, was on his own. Didn't have any family when he found out that I was in the real estate business. And I think you found out I didn't really talk to him about that, mostly to spend time with them just to be neighborly. Uh, he came over to me. He said Alex during the real estate business, Yeah, he says, I got a problem. I said, Okay, what's the problem? He says, Well, I have this land. I'm paying property taxes on it. I hate it. Would you take it. The guy was offering me land. It's bizarre. It's like it's out of a movie. But truly it was right next door to me. I didn't think he would ever be a source of income for me, but he came to me with this property. That was a problem for him. I ended up selling it instead of keeping it, cause it was a problem for me to this. This property was really crappy. And he got screwed by someone he trusted. They didn't do his due diligence on, but the point of it is I made about eight grand in I don't like 20 hours of work. I help my next door neighbor out. I didn't have to do any work to find the property. Uh, it was a very minimal investment to get in. Um, that's it. I mean, your network is your net worth is your network leverage that you never know who's gonna have an opportunity for you. The next principle is a big ones problem. Solving or asking asking yourself, ask how can I make this work? This is a really important kind of principle in underlying mechanism in your investment because like I said before, You know, by cash learning deals, you're probably thinking, and you're probably gonna hear this a lot from the people that you interview, like Realtors. You know, if I could just buy a property of cash flow, I would do it that a lot of properties are gonna be cash flowing and a lot of the deals you're gonna try to put together the offers are gonna make are not gonna be good. Probably looking at a very slim percentage. I would say out of 100 maybe two, like probably 10 would be ones that you tried before with you. Slice it down. Two would probably the two that you would choose between. Ultimately, give me one that you choose. You gotta be a problem solver. You gotta figure out what the situation is, what the terms are with the prices that combination of it. Problem solved. Create the deal. Create the cash flow. Number eight is a tough one for most people control emotions. It's very easy. Get emotional with real estate investing. There's a lot of time commitment. It can be frustrating if deals fall apart on you consistently. Don't give in to those feelings and don't fall over the property most of the most of all. You have to make your investment decisions logically. Stick with system if you stick with system This system that you that you're in right now you're watching it over teaching you. If you stick with this, you rely on it. Depend on it. Don't fudge it up. Just make sure the numbers work. Follow the system. You will not fail if you get emotional. If you start thinking on your own, that's when the problems creep up. Stick to the system. Make logical investment decisions. Have reasons for what you're doing. Don't do things emotionally. Don't fall over the property. It sneaks up on you. It's so tempting to see a proper It's all minutes. So good is making all this money. If these things just work out again, avoid the what ifs. Death by 1000 cuts. Stick to the system. Don't get emotional. Number nine is the scientific method. If you have any kind of ah background in science or if you've gone through at school, you might have learned what scientific method is you create. There's a theory you create a hypothesis. You test that hypothesis. You make adjustments along the way based on the results. Another way of putting it is pdc A. It's the PDC method plan. Do check, adjust plan do check adjust Its scientific investing isn't so rigid. SRE Investing in real estate in particular isn't so rigid that you could just follow one thing. University of work. It's constantly shifting, changing, growing, modifying. You want to try some things out. First you create a plan, try some things out. You see the results. You just making you plan. Just keep going through that cycle. Number 10. All investors do this, so you're gonna do it, too, before you make an investment decision, a commitment on an actual property you always want. Ask yourself three questions. What's the best case scenario is, the best thing that can happen is all to be doing. This second question we ask is, What's the worst thing that can happen to me? Number three. Can I handle the worst if you can handle the worst situation if you know what the worst situation is, if you know the best situation is you need to make your decision based on evaluating that, because once you get in there. You gotta get out that something's gonna make sure going in you're making the right call review. In other words, which could I guess, be the title for this principle review Before you make a commitment, what's the best case? What's the worst case? Can I handle the worst case? Finally, Number 11. This is a really important one because a lot of people are scared of losing money. Um, let's call this principle money as a means in this business and with most businesses, you know, they say it takes money to make money. It's not not really true. It doesn't mean it suggests that it takes your mind, make money. It doesn't. You could borrow other people's make money and to make money, but you're probably going to run into some mistakes. I encourage taking, uh, learning building experience. I'm not saying I want you to lose money. You should try to minimise your chances of going wrong and losing money. But just remember, if you lose money, it's nothing to be ashamed of. You're not stupid. Lots of people. I've lost money, lots of people whose money it's gonna happen. It's going a couple $100. A few 1000. I haven't lost a tremendous amount. Luckily, I've been following the system in the steps and obviously following people who are a lot wiser than I am. Eso minimize it, But don't be afraid. Money is a means if you lose a few grand now, if you stick with it, it will come back later. As long as you get good at this, as long as you make a commitment to get good of it, I good at Don't worry about it. Money is a means it's gonna get you where you want to go. That's all it's for. Don't nickel and dime people. This is kind of a related point. Don't be cheap. Don't nickel and dime. Protect your asset. Control your money. Know where it's going. Be responsible. Be prudent, but don't make it the be all end all. If it happens and it's out of your control, it's OK. Money is it means a lot of the mystery. And a lot of the fear that surrounds real estate is not knowing if you're gonna lose money or make money. It's in other words, not knowing the formulas, not knowing the strategies. Eso I'm gonna get into that very shortly. But I just kind of want to start by pointing out that math is an inevitable feature in this particular career path. A lot of people are crazy about math. Um, you're gonna have to learn to be friends. Uh, you don't have to crunch the numbers and everything. Uh, everybody uses spreadsheets when they invest. They don't really mean you'll write down a couple numbers, but you spreadsheets. So you don't have to do those large calculations on you might think. You know, it's easy for you to say. Maybe you're smarter. Where? I'm telling you, I was a terrible student in school. My brothers, there are the smart ones. I got the short end of the gene pool on this, okay? They were a student's math. I mean, my oldest brother came easy. My second brother, he, uh, he struggled a bit, but he worked really hard to get good at it. You're gonna just need to be friends with math. Even if you're not good at, you'll figure it out. Just practice like everything else. Just get comfortable with it. Get easy with it. I remember. Actually, there was this breakthrough moment for me. Just going back toe Being a bad student in school, I wasn't really to grade school. I had this one teacher who was really I thought it was funny. Super bright guy. He was. You came here from Russia. Hay was working on his chemist. He was working on this way of transmitting electricity without using physical things. Like, you know, wires, metals is crazy. So anyway, he I hadn't teach me a little bit of calculus go strolling with it, and I found him kind of engaging. But I just remember there was this problem I was working on and I was like, Man, I don't like I can't get this. And all he did was said, Alex, don't you know? So and so's law. And I said, Yeah, he said, Well, don't you know this rule and had a plug in that law? I said, Yeah, he said, There you go. So what I learned from that moment was there was this kind of fear in me that was keeping me from accepting the math and accepting the principles, accepting the system with structures and relying on that. What I when I made that kind of mental break through and I began to trust the numbers more . Uh, I realized I already knew everything I needed to do to be a success in calculus. I don't remember anything about calculus now, but at the time, that was really important lesson. So what I'm suggesting is if you're scared of math, it's OK if you can multiply, divides, attract, add, or if you have a calculator that can do that, that's really all you need to do. But you've got to be friends with math, and you got to use these formulas and these spreadsheets that we're gonna get to you later . So the reason math is so important specifically to do with real estate I'm not just advocating math. It's so important because all investors, no, first of all, the rate of return they're looking for, they know when they look a deal that could instantly tell. Okay, that deal's gonna let me this kind of return. You're going to need to be able to do these kinds of calculations. You want to know what you're gonna get in exchange for your money, especially if it's borrowed. You're gonna wanna know what you're gonna get return for your time. The only way to do this is to get comfortable with math. Don't run away from it, believing yourself. Do it, Practice it. It'll take a little time, but you'll get it. I know for you might look at these spreadsheets and go. I don't understand how I could ever do this. You might even miss it a couple times, but the more you just sort of become accustomed to it, the more deals you look at the mawr second nature will become. This is totally key to being able to quickly analyze a property and make a decision about where not you wanna put an offer and spend some time during negotiations. 6. 05 The Math Behind Real Estate Investing: uh, all right, so let's jump right into some of the math behind real estate investing. First of all, you want to know how you're gonna make money in a real estate deal? There's four money making components to any real estate deal. They're always optional. They aren't always. They're dependent kind deal you get. But these the four components, you're gonna have your cash flow you're gonna get the appreciation could be forced or natural. Um, one thing that's often kind of overlooked when you're sort of starting on real estate is the debt repayment. That's number three debt repayment is gonna be. Obviously, you get that loan over time, though you're paying it down. You're gonna get more income cause you got less borrowing costs, and you're also gonna have more value attached to property If you decide to sell the last one again. Tax benefits. Those are the four pieces of the fourth avenues of income on any real estate deal. So I'm not really gonna get too much into tax benefits. Tax benefits involve a lot of variables. You really want to go see an accountant also, because the laws are changing all the time. I don't want to give you one sort of for me. I can't give you one sort of formula to calculate tax benefits, depreciation, all that kind of stuff you're gonna need to work on account of. That's when I got touched that so much. Um, the debt repayment. There's calculators online. Um, you just sort of google, you know, mortgage, pay down calculation. You'll find something that will help you with that. So I don't need to touch that too much. So next is appreciation. Appreciation again is gonna very depending on where you're at. What kind of property you got, What kind of marketer and all this kind of stuff. So again, there's no set formula, but appreciation is pretty straightforward. Um, you're gonna take some You're gonna do some due diligence at the time. Talk to realtors. Go on Realtor websites. Find out what the properties are selling at over the years and you'll do an average of that kind of calculate on appreciation from there. That's gonna be with that market. Appreciate. So you can base your appreciation on that on the low end conservatively, that's not really too complicated with thing is that we gotta address right now is cash flow. Cash flow is kind of Ah, it's a term that's thrown around a lot. Um, what cash flow is is exactly It's the flow of cash. So cash is gonna flow one way, and the other, it's gonna go in your pocket. It's gonna go out of your pocket. There's only ways that cash is gonna flow. So on a given deal, uh, agent, for instance, might tell you like maybe they're going to buy properties for your old cash flows or you see a deal. Advertising says it's a cash cow, all kind of stuff. What does that really mean? They're gonna tell you, right? All you gotta do is pay off the mortgage each month. You got utilities, obviously, so you gotta pay for those two. But after that, this is your marginal profit. No, um, agents are in the business of dealing with selling. You gotta be in the business of figuring out what your actual return on your money and on the money that you borrow. So, first of all, let's talk about mortgages. There's a great way to safeguard yourself for mortgages, so there's different types of mortgages you're gonna get, You're gonna fixed mortgages. You're gonna variable rate mortgages. And there's also kinda little sub categories in each of those. But whatever it is that you're getting into with your borrowing, wouldn't it be nice if there was just one way that you could say, OK, I know it's gonna be like this all the time. We happen to have a way. It's the double 07 method. So the way this works is you wanna you want to multiply the amount that you're borrowing, not the amount of the property, Right? So let's say you're buying a property. $100,000. You're gonna put maybe $20,000 down the rest of his bank finance. Right? Um so what you do is you multiply 0.7 double 07 which is not 7% but the next decimal point over its Ah, whatever that is 70.0.7 percent. Multiply that by the amount that you're borrowing. That will give you a rate at 7% interest. Even if you're borrowing at 3% interest, that's a nice buffer. If it bumps up during the term that you're holding, if the world goes to heck the rates change. You've always got that buffer. So that's how you're gonna calculate your mortgage. Ages might tell you need to do that. Don't tell them about that. They're gonna tell you some number. You're gonna have your own numbers. Doesn't matter what they think. The double of seven method, right? We've got the $100,000 property. We're putting 20% down. So first of all, that percentage calculation, if you have one, that's 100%. If you have decimal that leads upto one, that's gonna be a percentage going up to 1%. So 20% is going to point to so point to by $100,000. That's train percent down. So you got $20,000.100,000 minus 20. It's going 80,000. So now you got $80,000 right? That's the mortgage. That's your monthly mortgage payment. Your your debt repayments. You're gonna be factoring that into your calculations even though you're not gonna be paying that. You're gonna want to assume that the rates could change on you in an instant. That concept of, you know, interest changing on you like that. That's a lesson that comes from the Rockefellers. Uh, John D when he was a little kid, his his dad was kind of Ah, mischievous. Um, he wanted one. If he was a snake oil salesman. He was, ah, womanizer. Very. He, uh he taught his son John a little bit about borrowing. John took out a loan from his dad to do whatever is Lee is doing. His dad said, Look, I'm gonna give you this money. I'm gonna charge you this at one point. His dad re called alone instantly because he has the power to do that as a lender. You negotiated that with John. John missed that point. So at that instant, all the money was recalled back. John was on a position. We pay it. He went into default in that deal with his dad That taught him a valuable lesson. And so the lesson is, the loan can be recall. It won't be recalled in the case of a mortgage. They're not gonna do that. But the loan could be recalled at any point. Interest rates can change at any point. You want to be prepared for that double? 07 comes in as a buffer. It's not gonna be what's going? What you're going to spend. But it's gonna tell you. Look, you're gonna have this much extra profit each month, but that's gonna be what you're gonna budget for. So next after we got the mortgage thing out of the way, you know your roots hotels. You just gotta pay the mortgage. Now, you know what you're paying next. They're gonna tell you about utilities, right? So what are utilities? You got heat. You got hydro, you've got electricity. In some cases, you're gonna have rentals, so you're gonna have a hot water tank rental furnace rental? Um, that's not necessarily a bad thing, but it is gonna increase your expenses each month because it's a rental. You're basically, but the owner previous didn't buy it. They they sort of do what's called like a lease option for it. So they have it. But the other company owns it. May charge. So you're gonna have to factor that in as well. If the property has a hot water tank rental. So it comes to making the offer. You're gonna want to check that on the purchase agreement will say whether or not it is or it isn't. Sometimes will stay in listing. That's one thing you gotta watch out for. Um, whether or not the particular deal that you're looking at has higher or lower than average expenses, which you'll figure out as part of your due diligence. That's kind of irrelevant, cause you might be able to change that. But you definitely want to find out why you want to inquire it. Why is it so high? Why isn't this instead of this? Or find out kind of what the story is behind those numbers, That's gonna be a party once you're gonna want assess that utility sign right next. You've got insurance. So in order for ah bank to give you a loan, they're going to give you a loan. If the property is insured, that's madness. They have no security. So you have to get insurance on the property. You want insurance because of a 10 doesn't kind of damage. If the house burns down on the ground, you're covered. You're gonna have a replacement cost for that. So you don't want a budget that it's typically like 100 bucks. I don't even know if it's typical. Depends where it what it is in the states where you live. I can't give you a fixed number there. I'm afraid. I wish it was easy like that, but you're gonna have insurance costs. You're gonna have property taxes. That's kind of ah, one. Everybody knows about property taxes. They're gonna usually, uh, they'll have it on the detail listing of the of the songs will have a listing that you can access. Um, if you get a detail listing or if the property is a for sale by owner, it's not a listed property. You can ask them for proof. Um, property tax bill is what you're gonna want to keep in mind. Some areas would be way higher. Some properties, they're gonna be way higher. You want to know what that is? Going going ahead. And as a matter of fact, sometimes they will change. You could buy a property and because you bought the property, you wanna check this in the states what state you're in? Sometimes they just decide if there's a new buyer, they're gonna jack up the property tax. So you wanna make sure that you least have some kind of figure may be taken average of the areas that if it changes too much, you could make a case and say, Look, this is what it should be. Property taxes. You want a fact? An ally? Agents forget about this. A little more optimistic than you're gonna want to be if you're analysing a property. So aside from that, of course, you're gonna want to know what happens when the property is not renting. I'm losing money. Yeah, you're gonna wanna pair prepare for that Because I have never heard of a property. I've never owned a property that was 100% tenanted all the time. Life happens. People move out, people. Circumstances change is gonna be a vacancy at some point. Well, you want to do is have that margin secured in your calculations. So because vacancy is sort of an inevitable, inevitable feature of your property, you're not gonna want to base the gross income that a property can produce when it's fully rented. Uh uh. You're not gonna want to base your numbers on the gross. You're gonna want a factor in that vacancy. So that that's your gross. That's what's called effective gross. That's going to be which are always gonna want a plan for on any given income property or effective growth. So now all the expenses that come that come up, you're gonna base that all on the effective gross number. You come. Okay, So that's your That's your income. You're effective. Gross. You're gonna need a property manager because you're gonna have tenants in their living in it on when it's bacon. We're not living it. You're gonna still need manager because you need someone to fill that vacancy. So you always budget for management allowance? Um, for vacancy, By the way, I usually budget 5%. You could play with it. Depends. Obviously, with the vacancy rate is in your area on, I'll explain how to calculate that a bit later. It's part of the due diligence section of this lesson course. So right now you've got your property man, and fees that you've got account for vacancies will be 5% leads to your effective gross. Now you take 10% off the effective gross. That's going to be your budget for property management on his different fees associated with that. But that's kind of roughly what you're looking at. So is a related point to the property management you've got the maintenance. Um, your maintenance costs are not included in the man cost. If you need a light bulb replaced, they're going to charge you for that. Probably not going to be cheap is if you did, it might be like a 40% increase or whatever. So you have to have a maintenance allowance. Typically, uh, it will depend on the kind of property you got and the kind of management evolved with the type of tenancy guy in there. But you could just budget 5% thes these percentages are not gonna be universal. It just gives you an idea to do a quick glance at a property. And I'll explain that little bit later. But maintenance get that 5% in there as well. You definitely don't want that now. The remaining expenses were recovered. The major ones, the remaining expenses are going to depend on again how you structure to deal what kind of moment you want. Um, when you scale up your business, you're gonna wanna have room for bookkeeping accounting. There's gonna be legal costs associated with setting up maybe a corporation or whatever other legal costuming to handle at the time. when you purchase the property, obviously, you're gonna have maybe a home inspection. You're gonna have appraisal. Um, so home inspection, it varies. Um, it could be 100 bucks. Could be 200 for 500 bucks, depending. What's going on in your area depends on who you want to use. And to what extent the appraisal is sometimes covered by the bank, you could probably assume 100 could go as high as 400 and probably driving you nuts. I can't tell you anything straight. That's how those businesses, though you go on account for the appraisal to. So there's a couple of one time fees there. You've got your monthly fees. And just remember now I don't really invest too much in condos or town homes. But in those situations you have homeowners, associations, fees, these air dues that are paid because things in that community are going to require it repair. So sometimes it will be a roof. It could be a pool. It's gonna need the cost covered. You're going to pay the each month and it varies. Sometimes it could be zero. You can have a freehold, uh, position if you're part of that community, the homeowners association or the condo fees, Or what have you that can range between maybe 100 toe. I know someplace internal there, like 7 800 bucks. It's pretty crazy, but that's gonna be something else to go anywhere. So this is all just kind of like, you know, it's not that simple. When you look a deal, an agent goes off, it's a cash cow. You do is pay a mortgage, and the rest is yours. There's a lot of expenses are involved that they don't know about because when you're running a business, they come up later. They can't possibly know about it. You want to be prepared for that before you get into a deal? I want to talk about incorporating and just sort of touched on in a minute ago. That might be when your costs that you got a factor in before you purchase a deal. I, uh what I was taught when I first did this a while ago, it was a different system. Was you always want incorporated. Um, I'm not gonna give you advice. I cannot give you legal advice. You want to go talk to a legal professional, Um, someone's got a lot of experience dealing with the types of properties or the types transactions that you want to get into real estate lawyers and ask them. But Inc is expensive. It won't always make a lot of business sense to get into that. However, if you're going on title personally, Um, that's what's called exposure. That's like the legal language. Your It's a liability. Anybody can see you any time for anything, really, if you don't shovel the driveway so we could slip and fall. So you all right? It's crazy. They chose to walk on my icy driveway. Why would they do that with the matter's gonna see, uh, in the States. There's some kind of number on you know it is. I remember it was just so high. It was crazy. It was like 90% of the world's lawsuits occur in the United States. Like the world's lawsuits, 90% is in the United States or some crazy don't hold on. It's some crazy number like that, so in the States you might be better to be safe and sorry, but you also get some really great opportunities in states that are not privy to other people, other parts of North America. But, uh, if you do get a super great deal, get incorporated, get incorporated, get that deal under the corporation rather than yourself. But, um, there are gonna be these costs associated with it if you want. I can't like these percentages I just gave you. You can't regard them as sacred because the devil's in the details. Um, I can give you some rules of thumb that generally seemed toe work on. You're gonna want to use these rules of thumb. You're going to use some of these margins in your calculations when looking at a deal because you want to be ableto as I said earlier. Look, a deal. Have these numbers in your head, okay, that's what that's going to get me. So you can decide whether or not it makes sense to put an offer on a property that just quick and analysis. So these rules of thumb quick analysis not written stone, Not absolute. Okay, but this is surely helpful to move the investment process along. Um, with single family homes, you're typically gonna wanna budget 30% of your effective gross income on those other expenses. This, of course, does not include the mortgage. That's gonna be whatever it is that you figure out. You could do the double seven method and if you want that, but you want to put that in later. But just for the expense column. 30% Single family. If you get ah 2 to 3, you're looking at 35%. If you get upwards of five and six. Not really four force kind of milligram. But let's say five and six. You're starting to get into what's called the multi family side. So commercial loans now rather than residential loans, different type alone. Higher interest. Typically, there's some advantages to it as well. They don't look at your income per say they will, but in addition to the property, they'll make an evaluation of the property so slightly higher interest rates. Those properties. You're gonna want a budget higher, because when you get in the multi family domain, there's all kinds of expenses that don't come up in the residential single family, home domain and rental. So you're looking typically 56 units, 45% if it's six or more. If you're looking at a 200 unit building, which I don't suggest you buy right away. But if you're younger, you're looking at about 50% again. It's always gonna depend on Don't rely on this. This is just you. Look at those percentages. You plug it in, you see a deal, right? You plug in those numbers based on the income that the the add is gonna tell you that would give you a quick way of saying okay, all gonna look at this. It requires further investigation. Those your percentages there. 7. 06 Quick Analysis Tools for Choosing Properties: Uh, okay, So I gave you kind of the breakdown there of the of the expenses cash flow you might be thinking. OK, that's a lot of work, you know, and I agree with you don't do all that work when you're just looking at our property and you're not sure if you want to buy it. Yet your time is too valuable to be caught a crunching numbers for no reason. Okay, there's sort of quick property analysis tools. I want to encourage you to use these and again, they're not sacred. Uh, they're not universal, not written in stone. But these are just kind of quick tools that you can see it properly. All that might be a good when you plug these in a way, you go and you get start with offers. So the 1st 1 one that's really popular offer for investors is it's called the gross rent multiplier. G R. M. Um, the way you calculate you calculate is you plug in the purchase price over the annual income, and that produces a multiplier. So what that multiplier is? What that number is is if you were to multiply the income by you'll find out how much she paid for a property. Um, so let's say you buy a property for $125,000. The you know, they're asking on $25,000. You wonder should pay that or whatever. I don't know we're going to. So let's say it's hard. 25 right? Divide that by 25,000 which they're going to say is gonna be the gross income the property rents for 25,000 year. 135 divided by 25,000. It's gonna be five. The rule of thumb is to target properties that are five and below. If you get six or seven, the property could still cash flow. Um, it depends on what kind of market you're in and also depends on what kind of terms what kind of rent versus price. So it's gonna vary, but typically five. Use your target fiber lower. So, um, when you when you plug that number in, it will give you a quick way to say, OK, maybe I should give this guy a call and figure out what's going on. There's a downside, though, that the G arm, um, leaves out expenses this is really important. You want to know expenses? Because it might be that the expenses are just that way. There's nothing you can do about it. If you buy a property based on GM, that's madness. But, um, you just sort of start off with that number and decide. Okay, Well, this property came in at 5.8 or six or seven. Maybe if I if the vendor, if the seller is negotiable, I can bring him down to this number or get better terms. And I could make it said it gets closer to five. Doesn't have to be exactly five. It might not be wise to assume that because a property was six or higher that you shouldn't touch the property. I'm gonna leave that up to you. Depends on what Mark you're looking at. But FYI, but grom of five is a good, quick world thumb. When looking at properties, that's one technique that you can use. So another quick calculation tool you could use if you don't use DRM. This one's a little bit more. It accounts for the expenses. Right. So you do a little bit more math here, but it's okay. This one's called the cap rate or the capitalization rate. So just to expand on that a little bit, um, what happens if you got a property? That's $300,000 the income you calculate the net operating income to be $20,000? Does that mean you shouldn't put an offer on the property? Um, I don't know. Uh, you need Teoh. See some more things before you decide that. So, first of all, what kind of market or you are you in a buyer's market? A Seller's market? If you're in a buyer's market, that means that the seller is probably open to negotiations, right? The buyer's market. You're the one with the power there, then one of the disadvantage. If you're in a seller's market, you're not really gonna have too much option for negotiation because, like just to give an example again in Canada, there's the Vancouver market, right? So in British Columbia, so uh, recently has been a little bit turmoil. ITT's climbing back up again, but at the time at its peak, people were from all over the world, was buying properties. It wasn't even a question negotiation. It was all paid $10 million. I'll pay $20 million. It was just a bonanza. It was crazy. You can't really. I have no way of getting your property like a 10% cap on a property that the seller does not care, Uh, one way or another to negotiate on. Okay, There's just no way to do it. So again, if the property stirring $1000 right income is 20 if you think that, um, you're in the kind of market that you can go on, approach the seller and have a discussion with, um you could really do this in any market, right? But let's just say you feel like OK, I had steering 1000 but I think they can come down if you got a cap rate. A 10. Uh, you're doing excellent Cappuccino. 10 or higher is is fantastic. It's very rare that you'll just find a property like that. So if it's close to 10 or you looking at, you think you can get to 10? It might be worth investigating. Ask more questions, making some calls, putting out enough from that kind of stuff. If you've got the Capri of 10 right, 10% dividing your net income over your purchase price that's going to tell you something else is another technique. It's called the Rule of 10. So this 10 number, if you multiply 10 by your net, that will tell you how much you should pay for property. So, a minute ago, I said, you know this what you're gonna pay for the property, you could determine that by multiplying 10 by the operating company. Long as you've got income and expenses, you can find out how much you would pay. And again, it's a rough calculation. I'm not saying do this and then you make an offer on that number. It's not that simple, but this is again just a quick tool. So 10 times a net operating income, or determine the cap rate by dividing the operating income by whatever price you want to pay for the property cap rate. You know why Times 10 thes are just your sort of quick and dirty calculations. But what happens if you, you know, you might be saying OK, you know, that's a nice rule, but that doesn't work in my market. Yeah, chances are it's not gonna work. You're probably not gonna find a 10% capri just sitting there, you're gonna have to make it. But if you kind of want to see how close you can get to that and depending on what kind of market you're in, it may make sense. Toe Still pursue, uh, on offer on a property that is a little too expensive. For instance, where I'm at the Kappa rate is like the two. I think her or four that's that's detrimental to your income statement. It's your negative, right? Or, I mean, you're in a losing position because it's such a small margin for you gotta do for it. Um, so I wouldn't say that you would pass some properties. Just based on that is a quick calculation. Eso If you're in a market where that doesn't work, you can play around with that a little bit, because there may be the opportunity for you to negotiate a better deal so we'll get more akin to a little bit more in a bit. But don't pass up on properties just because it doesn't fit these quick calculations because your property, your area, might not fit this exactly. This is a very particular set of numbers doesn't work everywhere, but it's a general guide. So if you're not quite in that margin, you could still make an offer on property. If that's just kind of what the areas like you want to kind of do a bit of due diligence, find out what the cap rate is in the area. It's gonna find out what the average expenses are in the area. I mean, through a property manager, uh, what the averaging of rent is, you can find that from an agent, do your own number crunching. Find out kind with the averages for the area's, add them together and divide by the number of properties that you looked at. Also, proper types. We're gonna influence that. Keep it within the same property type that you're looking at. Don't base your cap rates on apartment buildings because it's gonna be crazy. It's gonna be way different. So should you pursue a property that has a cap? A rate of two? Um, you know, I have a couple properties where the cap rate is low. It's not quite that low, but, um, I'm doing them as a different part of my strategy. If you put more if you put like, let's just say you put all the cash in the window. You could make anything cash flow right. You can make operates whatever, whatever you want. Um, but when you have these lower numbers, what that tells you is that there's less of a margin of return and there's probably higher risk because you've got a huge mortgage that your you're so you're doing a double of seven calculations, this huge mortgage to account for and it is one vacancy. The rents are not high enough that you can allow that you will be in a negative cash position right away. I would. If you're just starting out, I would avoid um e If you got to buy a property, you might want to raise some capital before you start borrowing on properties that have very little cap rates. That's what I would suggest. Um, ultimately, it's up to you. It would make sense if you bought a property. Let's say in Toronto, if you if your goal was to not make too much money, you only want to make like I don't know, a dollar a year. But now you gotta put more down on that property to even get that. Because the rents are so far outpaced by the property values, the cap rates are so low it makes almost no sense. It's peddling your strategy. 8. 07 How do you know what market to invest in: Uh, all right, so now you've probably got even more questions. Um, I just sort of left you with a bit of a cliffhanger, but how do you know that the market that you're in is a market you want to invest in or me ? More broadly, how can I identify which markets to invest in and which to avoid? This is so important. And for some reason, a lot of these real estate courses, they don't even touch this. Uh, I'm not sure why. I think it's probably because it's very boring. So brace yourself. I'm gonna try and make It is a sighting of the can. But there is a system in place that you can use to decide what kind of market you want to get in and why. It's all based on economic fundamentals, the economic fundamentals. Why, why is that so important? It's important because you want Teoh invest in a market that not everyone in the mom is investing in. There's not gonna be too many deals left for you. I mentioned early. You're not gonna have much of a way to negotiate if you're in a seller's market where everyone's buying and because you know, it's so great to buy here. It's amazing. So you want to know ahead of that rush that influx of other competitors or other investors ? Um, which market to get into before they do? The good news is there is a way to do that, Theo. Economic fundamentals, right? That will tell you which market to go for the economics will precede the values of real estate every time. So, um, if you've got a market right that people aren't paying attention to, because why would why would you want to invest there? It's just a bunch of, ah, you know, cheap properties and slumlords, whatever. Well, maybe that market has a lot of artists in it, which typically you'll find you get these. These kids are okay with living in those kinds of circumstances because its rustic it's cool or whatever, so that will attract more students to the area. More tenants on, they'll make things look better. They'll they'll. Maybe they'll paint some stuff like like I will be like electricity boxer wherever they make it in something creative, like an owl who knows, right, they turn the area around. That's that's kind of the beginning signs of gentrification and area. When an area is rough gentrifying, it's turning over into a better area. And now this place is known is recognized as this, uh, this artist spot. A hip art scene starts attracting more students to the area, so we start to see ah, bit of I mean, it's minor because it's only related to the university, but a bit of a growth there, right? Um, what happens is these students often times will have job. Let's say in, uh, video editing, graphic design, these kinds of things, they're good paying jobs. What that's going to do is the population is going to increase. There's gonna be mawr influx of jobs, cause that's where the students are. So maybe some businesses move in. Ah, and this basic relationship, right? This is kind of a micro example. But this relationship between population income is an early indicator that the fundamentals are going to be in a market that my otherwise perceived be perceived by most people to be maybe a slum marker crap market. That's that's kind of how that relationship it's not the strongest example. It's very peripheral, but that's that's kind of an indication of Maybe you want to look at a market that has things going on that no one else can see. The early signs are gonna be things like population growth. Um, income, job availability, businesses moving in. So we're gonna take those in turn right now. All right. So economic fundamentals, how are you going to know that the area want investing is a good area? How do you identify these markets? Well, it's broken up into kind of two parts. You've got the macro evaluation, which is kind of the wide angle lens or the or the maybe the telescope from far away. You're looking at something like this is how it looks in the larger scale. And then you've got the micro economics. So you've got the microscope now you're looking at them in detail. So macro side, that's going to be maybe a nation as a whole. So entire United States, all of Canada. Um, it's also include maybe each state or each province, so that would be the macro side. You want to check out the whole country and you want to get the province. Those are big. You're gonna want to look at individual cities that's going to more than micro site. So within those states and provinces, you've got those Mike the micro side of it, the city side within the city's You're also gonna have a neighborhoods. So the macroeconomics province, state, country, micro side, you've got the city and individual neighborhoods good. You're gonna want to analysis, um, more or less from the macro to the micro. So let's say you know, already you want to invest in the country that you recite and probably be the best thing for you to start with. You want to find out a little bit about what's going on in that market, right? You wanna get a sort of a standard average of all the major indicators which I'm gonna get to us, I get that all together, find out the same for the state. Then you wanna compare that to City? How is the city that you want investing? Maybe city you live in? I would suggest starting there. Actually, Maybe that city is performing a certain way. Now you can compare it to the state or province and you compared to the country. And now you can see this is how the city is producing is this is the kind of income this city's producing right here in this state. Maybe you want to compare it to another city. Maybe the city urine is not good enough. I was just starting there. Stay as close to you Can. His home is possible because you already know the areas a little bit will be easier for you to manage. But now you can compare the different cities and you can pick one because of how it's performing against the backdrop of these of the macro economics eso each individual neighborhoods also gonna perform differently. Depending, you've heard the expression the wrong side of the tracks. You might have an area where you have hot, affluent properties and literally just across the train tracks you've got, um, the less affluent properties, each one is gonna perform differently. And you're going to make your different calculations on which properties one again to and all that. But you want to find out what's going on in those different areas of different neighborhoods, different cities and breathing is the backdrop of the macro economics. That's kind of the path I'm gonna teach you. Now let's get into the identifying these different indicators. One by one 9. 08 Market Indicators How to select the right market to invest in: uh, there are nine major indicators when considering whether or not you should invest in a town or not the 1st 1 Probably very obvious. We touch down a moment ago. Is this idea of in migration and demand the population side? Eso The question you want to ask is, you know, um, are people moving here? Are they in migrating Not just, you know, immigrating, but within one city. They're coming from that city to this city because there's jobs here. So a related point is, are there more businesses coming to the city to match that new influx of potential? Ah, employees? What? What is the in migration and what is the demand? You can find this out by checking out. So, for instance, in Canada, there's, um stat can statistics Canada. Um, but just use Google. Google is your friend. Just search in in migration rates of the city you're in, you'll find whatever link or or you could even better go to Wikipedia. Ah, lot of people pooh poohed Wikipedia, but Wikipedia to their credit sites their references. So if you want to search up your town, start with Wikipedia and then you can find out what the population is. Probably tell you something about immigration there, but you always follow their links to see where they got their information from. Get more details on that. Find out. That part for the second indicator is the question. When I ask, is our average incomes for that town, that city that you're looking at the micro is that outpacing the state average the macro side. So, uh, if the average income for that area let's say you know you might, it might even appear low. So let's say you make $1000 where you're at, right, but you can't buy in your area $1000 a week or whatever. And then Aaron other you look at people aren't making 1000 hours a week making like 200 bucks a week. Only 200. But anyway, something lower that doesn't it seems low to you that's not relevant. What's important is the percentage growth, the growth in the average incomes. That's an indication that, um, that's gonna be an area worth investing because it's gonna increase jobs. Gonna increase population is going to increase the ability to afford properties, so we're gonna have more buyers and you're also have more renters because they're gonna come in looking for jobs. Thean migration Before we talked about immigration, they're coming looking for those jobs you can increase rents, scarcity of rentals, scarcity of properties, purchase over time. That's kind of the picture. But that's the beginning driving force whenever you have the average income increasing at a rate beyond the provincial average that indicated tells you that that's a town worth investing in, because pretty soon there's gonna be fewer houses to buy fewer rents available. That's the future of that indicator. So those 1st 2 indicators are the chief indicators for you population and jobs as long as you've got those two outpacing, um, the macro side of the of your economic research. As long as those two are there, you're gonna be pretty well covered. But you want to know the other seven. Definitely. Teoh make a wiser decision. So moving right along the third indicator is the political climate. Does the the the mayor of the town? Are they providing incentives for businesses to come in? Are they giving them tax breaks? Are they building infrastructure? They pushing for better transit? Are they more favorable to landlords, are they, um, allowing landlords to charge whatever they want and rent not listening. Any tenants were complaining. You know, you get the idea, so as long as they're kind of facilitating that business side of things if they're incentivizing businesses, if they're incentivizing investors like yourself to purchase properties, become landlords. Uh, that's gonna be the kind of market that you're gonna see more more jobs coming into. And again, you're gonna increase the average income. Let's get increased. Populations all kind of isn't related. It's intertwined. That's the third indicator for your political climate. The fourth indicator. Um, the question I want to ask here is it has to do with mortgage rates. So the question is that you want to check Is our mortgage rates at historic lows? Actually, in truth, mortgage rates are not really the kind of a neutral issue for investors. There's always ways around it. Because investors might not always use the conventional or retail lending rates, they could always do private money. I'll explain a little bit about this later, but investors always have options, and with regards to the change in prices of the result of interest rates or the change in rents is there? I mean, it's kind of not really huge deal for you. The important thing is just to see Hey, you know, can I buy this property? I get it funded by a traditional lender at super low rates. That's just another perk for you. Says something else you want to keep an eye on. So the fifth indicator transportation expansion you a great idea, A great thing for you to do. And I know if you want, make a note of this or whatever you keep in mind if you can go on ghoul. Uh, if you have a Gmail account, set up Google or it's cooler to our fantastic what you do is you want to type in there, you know, transportation, you know, expansion growth or whatever kind of word in the city that you're looking for. Try and keep that search narrowed down, and there any time is a community news of transportation. You want to be the 1st 1 to know. A lot of times, what happens is there's gonna be a new highway, or there's gonna be an expanded high away, or there's going to be, uh, more routes on public transit or is getting new subways or any of these kinds of additions . If improving the transit of the city greatly improves the value of the city to the people within, it helps and get to their jobs. It helps them toe live life that they can easily jump around the city on transit or drive toe location. I want to do much more attractive that way on. Actually, there's a really fantastic kind of statistic. If you purchase a property within 800 meters radius from a new transit expansion, you will see a drastic improvement in rents and sail. Um, the sale of the property so so appreciation. So the rents go up as high as about 12 14 16%. Just because of that, new expansion emerges there, um, purchase prices, same story. It's like 12 16 18%. Something crazy like that. Obviously, it depends on what kind of transit improvement there is. So if you have, let's say hi like an affluent, proper, affluent neighborhood that you're considering investing in. If there is a new railway put in there that might harm the values of the property, actually, because in that case those Afghan people probably want to drive nice, big fancy cars. They don't take transit and knocking them. This just seems to be the trend. So what happens is that's less desirable for them because that creates traffic for or interest for. Maybe people don't have access to two cars, fancy ones, and they have to take the transit. And that's kind of a clash of cultures there. And it tends to devalue those affluent properties. So a little bit careful there. It's good to know that is partly due diligence as well. But just keep in mind trans improvements within 800 meters. If you've got middle class or mid range properties or Lohan properties, the closer they are to, um, really, uh, public transit improvements. The bear that's gonna work for the property if it's affluent, maybe near a new highway, that would be really great for them. The highway actually works for the lower end as well. Um, that's just one other indicator to keep in mind. It's a great way to make some extra cash. What's really important were you really wanna be careful is do not buy on the rumor. You can do that with stocks with real estate. If there's a rumor of a transit expansion, do not buy. Based on that rumor, what you want to see is shovels hit on dirt. You see some actual money being invested. Maybe the mayor signs there's there's gonna be a news report. Mayor put in this amount of money into this company to do it, and the company is now. But this major borrowing tool or whatever, and they've already got toe work. That's when you want to start buying. Don't buy on the rumor, buy on what's actually being done. And even then, be careful because is, for instance, famously are our Mary. No around the world. Former Maradona's Rob Ford. Um, not knocking the guy, but there was a major transit, um, cooperation with with Metro links. This is a company that was gonna come in and improve the transit in our area, and they're gonna add another subway route. Teoh, one of the major universities a little bit farther outside of town New York University. He after they bought these tools, and they started digging after that already went in a way. He came in and said, You know what? We're scrapping that project. We're not gonna do that anymore. Um, it ended up going through. Everything is okay, but at the time, that create a lot of stress. Metrolink was pretty pissed. They don't must be for metro links, but in their response was something like, more or less. You know, when you guys were decide what you want to do, we'll go from there. But right now, we're kind of not sure we want to do with you. Um, so, sometimes the political again, this goes back to political environment. Sometimes they'll screw up your plans so you can't rely on that 1%. But more often than that assumes they started digging as soon as they start spending money . That's a pretty clear indication that you can start buying an area. So after that happened with Rob Ford and messing up metro links and all that, it didn't have working out coming around, it didn't negatively impact any of the areas per se. Um and you know, But I'm just sort of illustrating that if it did, if that if they did come to the fact that you know Metrolink abandon the project, it would have cost. It would have been a lot of 1,000,000 spent over nothing, and it would have. I mean, there in Toronto, the investors would have still been OK, but they wouldn't have realized those terrific gains. And if they had banked on purchasing properties for those gains, they may have over levers themselves where they may have put too much down. That could have used a better deal, so just be careful about that. But more or less, you should be OK once they start digging. That's a pretty clear indication you got a green light. Go ahead and benefit from that upside. One of the next indicators is kind of interesting. One hits close to home. Obviously, this is the, uh, sort of the wave or the ripple effect. What tends to happen is when you see an area that undergoes a bit of a boom in prices, the surrounding areas begin to. It's kind of like throwing a Don. Campbell gives a great analogy about this. He's a another writer in Canada, I wrote real estate. Messing can a fantastic book. So he said, he described it like this. It's like throwing a pebble in a pond. Pebble drops in the middle and then all these waves kind of ripple out. Um, that's what happens. Toe prices also to rent any of the areas that are surrounding it. They become more expensive in the rent scope because people start thinking que well, I can't afford these prices now Where can I live? That is a little bit more affordable, but not too far away. Let's just go into the next next town. It's just Ah, one and again, this is where the transit comes in. Just one bus over there, or you just hop on this highway and you're there in two seconds. So the ripple effect. If you're seeing a boom in prices in one area, it's going to affect the surrounding areas. And the rate at which that happens depends on what kind of areas they are. If it's an area that's so here in Canada and example in Toronto, actually, is Hamilton Hamilton? Uh, kind of. It was a steel town. Um, they only had one major industry, and because of that, the market sort of tanked on. A lot of people suffered from the fact that the auto industry has taken a hit during the recession. Um, didn't seem like a very good time to invest in. Um, actually, it got worse before the recession, but anyway, it didn't seem like a really good, uh, town to invest in. Except this guy Don Campbell kept talking about the location is like, Look, it's right, it's right next to the U. S. It's right near Toronto. It's got these other fundamentals in place. So we've been talking about It's gonna be crazy. And now it's crazy. It's crazy like it's, It's the prices are so high, it's almost unaffordable. I, for one, would be It's really for a lot of people living in health. And that's the ripple effect that work. And it's going on all over the area surrounding Toronto. Seventh indication of where not you should invest in an area is seeing gentrification. So we touched on this a little bit a moment ago. Gentrification is the shift from an area that is less desirable to an area being more desirable for more buyers or renters. So as a concrete example, you might have an area that is kind of overridden by, um, and again, this is no not knocking anybody, but let's say low income um um, areas, these areas that have a lot of what you call like government funded housing. Um, these areas are not really managed very well. Um, and they tend to invite criminal behavior. So let's say prostitution, drugs, these kinds of things, that's where they tend to take place. Eso if those areas were once really great, and then they turn into that they have a lot of history or character. But now they're not really accessible, mostly because they don't look desirable. What happens is over time, because maybe of the ripple effect or because of art students moving in or whatever combination are, um, alternative. These areas gentrified, they start turning around. So what? The sign for you to look out for the question is this area gentrifying is Are you seeing a mixture of older houses and newer houses? So are there like old Victorian style homes? Right next toe giant rectangular, solid window frontage built like it looked totally modern, or maybe not that extreme, but houses there may be getting top ups. Are they? Are they expanding up or outwards on the properties nearby? Is there money being invested in the community? Are business new businesses opening nearby AM is their pride and a lot of the areas do you see grasses, neatly cuts and shiny new cars, these kinds of things. It mixed in with those other things. If you get into those areas that are gentrifying, this is gonna be the most bang for your buck. You get a huge return by buying an area that seems less desirable but then turns around as long as it's contained within a desirable city. Indicator Number eight speculation. Is there a lot of speculative investment in town? And what that means is, before we talked about this concept of gambling so speculating versus investing two different things. A lot of times, what people will do if they got a lot of cash is they'll buy a property that's way over price and a super hot market because they want to benefit by the appreciation. The banking on appreciation. There's no guarantees, but they don't really care. They're just nutty, right? So these were speculating. If there that's happening, that's a pretty good indication that the values we're gonna pick up really quickly people are putting all their cash parking it there because they know that's an area that's gonna grow that tells you something to keep an eye on his properties. Are people just buying properties that may not seem fit your structure of investing, but there's buying them anyway. I'll tell you something. Okay, so the ninth indicator, this is property specific. The question I want to ask is, Can I change the uses? Their highest and best use that I can introduce into this property isn't already there and related. Can you see that going on around or anywhere near the town of people doing this? Um, as an example, we bought a property in October a few months back. Uh, this particular property is a it's a raised bungalow. What we're gonna do with that is we're gonna convert it to a duplex, actually underway right now to begin renovations were still just finishing up with permits . The reason we're doing this is because there's a government incentive to create legal, affordable rental units. So the government's essentially gonna pay us to convert this property from a single family home into a legalized duplex. In so doing, we increase the value of the property. We can increase rents because it's illegal. It's illegal property. It's it's safe. Um, we can do some refinancing on that deal, pulling cash out if we need to get all these benefits because we change the use of this property and it was government funded. Now you may not get a government funded change of use property. That's OK as long as you have the ability to change what's going on with this individual property. You may have a large potential upside if you, for instance, get a, ah lofts Oh, our factory space. And then you convert your segment into different title condos. You can sell off condoms individually within one building that you bought on one plot of land that doesn't always work. That's a strategy known as condom immunization. Not that I recommend. That for you now requires deep pockets, but just so that you know these kinds of things, just think about what other way can this property utilize? It isn't right now. Can you convert it from a single family home into ah Ben breakfast or Airbnb? Maybe jack up the the rent values a little bit that way? Just figure that out, and if there's any way that you can do it is great. Martin's for you there. So those are all the indicators that are gonna tell you whether or not the town is worth investing in? As a matter of fact, if you got five or more of the nine that we've just listed there, that's going to tell you know what? Go investigate. It's worth your time. If you've got less than five, there's lots times out there that are probably more worth your time. A two point. You're kind of gonna be missing more than to be hitting, so I wouldn't start that I would just focus on those five towns. Um, it's super important because I remember the first time I learned about thes, and this is coming from Campbell again. The first time I learned about this stuff, it gave a context for all the other stuff I learned. I learned about the strategies and the formulas and that kind of stuff, but I didn't really know where toe place them. But after I learned it, I kind of didn't really follow it. And it's like, you know what? Every time and Don himself said that I met him one time. He's awesome. He's nuts. please. Awesome. So he said, You know, it's funny thing. Every time I buy a property near like new transit expansion suspension, I always make a ton of money. It's like for some reason that affected me. It's like, You know what? You can't like. The fundamentals are gonna work for you. They're not emotional, their tried and true. They're trusted. The thing that you have to do is be ableto have the perhaps, maybe the faith in them. If you don't really have quite the understanding of it, as maybe someone like Don Wood, the faith that it's going to be totally reliable, it might not look like it. I mean, when I went to Hamilton years ago, I heard it was a place to check out. I was like, Why would I put my money here? This is ridiculous. I couldn't handle that. The low income housing stuff over there that wasn't part of my profile, Um, but you know, he was right looking. Now at Hamilton, it's it's it's a great market and it's always been and always had opportunities here there , but especially now it's where everybody's going, So trust in the fundamentals don't trust yourself with all due respect, trust, Trust these guys. They're the pros. They know what they're doing there. Right? Follow it. 10. 09 When is a Property Worth Looking at: uh, so with the indicators, Teoh decide on which kind of market you wanna get into. The question now is okay. Well, you know, I've got those indicators, but what indicators Tell me whether or not our property is worth looking at. Uh, there's pretty well at four major ones. First of all, you wanna see, you know, can you buy at whole sale on again? This doesn't mean I'm gonna explain a little bit about the terms and all that kind of stuff in a little bit, but when you're getting a wholesale value, it could be in price. It could be in the terms of the deal, and it could be both. That would be ideal if you could nail that down. Um, the wholesale purchase and then selling retail is everything in your business and renting at retail. That's everything in your business. You want to be able to purchase those kinds of property. So by looking at a property mentioned earlier, if it's $300,000 is we're fine. Okay. Well, let's Let's take a look. What can you rent it for? What kind of income is it gonna generate? The next indicator kind of related is management. So can you, by the $300,000 property at this cafe. Okay, well, what are the expenses? What is the income and why? What's the story behind expenses? It could be, maybe the properties so expensive because they have all this outdated, inefficient. You know, all these appliances are always fixtures in the house that are just draining the property. It could be that the owner doesn't particularly care to visit the property, and the tenants are cranking up the heat and then leaving windows open in the winter or jacking up the A C even when it's not particularly hot outside, the proper needs to be managed. So if the deal if you're looking at a deal, it's $30,000 you think, OK, well, the capri doesn't make sense. It could be that it's just poorly managed, and there's a lot of opportunity and that that will tell you whether or not you want to get in that property. And it's only gonna happen when you start asking questions of the Realtor, the owner and doing your due diligence process. So it's kind of an afterthought. But if you if it seems like the average of the other properties around. The expenses there are lower on. The incomes are higher than that is going to tell you something about that property. You take a look at it. The other side of it is advertising. Is there anything about this property that you're looking at before you buy it as anything about it that has an advantage to another one? So maybe if you're looking at, like a condo, right? Maybe one condo was built to have a lakeside view condo built up in front of it. Now doesn't have a lakeside view for that kind of that built up in front of it. No other kind of built in front of it. Advantage, Right? Maybe there's also a metro like a grocery store, like a major like Starbucks, you know, right in the in the main level. If you got major retailers renting out the commercial side of the condo, that's again. Another advantage. Maybe that being near the lake or the the view of the lake or whatever you've got, like a little space where people can run an exercise, maybe it's close to the highway. Who knows? There's all kinds of competitive advantages that you've got in this property that you can market with you won't get with that other property that's behind it. It will be much more attractive. You can increase rents if you buy a property that someone mismanaged. Now you can increase it not only by improving management but also by improving the advertising, talking about things and pointing out things that they weren't they took for granted. The last thing is that the fourth indicator for looking at any other property is the question of renovation opportunity. Another way of putting it is called value. Add propositions. If you've got a property and you have the opportunity to maybe add another unit, um, or two maybe update some of the cosmetics of it. So let's suppose you've got, you know, wallpaper ugly trim, salmon pate color all this kind of nasty, outdated stuff. You get in there and clean up its ah, quick and cheaper innovation. You turned the property around a little bit more attractive. Teoh, better tenants and also tenants who are willing to pay more to get those different person doesn't cost you very much. So again, renovation opportunities, always something it wants to that you wanna have when you're looking at investment essentials. Not always the cash flow, but what you can do personally to control the value of the property. And again, controlling is the kind of the theme of this investment course that we've been talking so far just to kind of wrap it all up you've got. Now, um, some quick calculations, you've got a means by which to select, Ah, market to invest in. You also got a way to choose your certain property. So you're set up right now. This isn't sufficient to say, OK, now you can rely on these. Everything's gonna work out. You've got to do some personal work. You've got to figure out what kind of criteria it is that you're after. As faras, your investments go so well. Two things First of all, your criterion. Second, your market. So first of all your criteria, that's gonna dictate the kind of niche that you're gonna want toe, uh, get involved with and make money and seems to be the trend with investment broadly is that there's always a sort of a niche market that creeps up that some people jump on and then eventually nobody finds out about and then it's, you know, over flooded, and there's no more opportunity left in there. So you've got to find what kind of criteria, what kind of niece you want toe go after and then second and related is the kind of market within which to get those niche opportunities. You build your business around what it is that you want to get involved with, and that's gonna depend, ultimately on your goals. Um, this is kind of more of a personal, never. Actually, that's what entrepreneurship really is. It's It's a lot of soul searching. It's a personal development process. But once you figure out what kind of income it is that you're after, you're gonna want to figure out what kind of fish you want to get into. Do you want to get into, For instance, um, single family homes, multi family homes of a certain style? Do you want to just get into? So, for instance, in Toronto, no formal properties, quote unquote right there are, you know, Freehold Town homes in more ghetto areas, but because you can purchase them so cheaply, you can sell them so cheaply as long as you renovate you silly. Renovate those units. If you buy them in bulk, let's say usually renovate them. Now you've got all these affordable properties, and you gentrify the area by slowly turning them over one by one. That could be a niche of years that you can exploit. Um uh, And the market, of course, has to fit that. You So right there the kind of market you would want is an overheated 11 in Toronto, where that niche makes sense would make sense to buy ghetto properties in a ghetto area. Anyway, just because you can't turn around for more because of the other properties aren't gonna you know, that kind of relationship works out is you want to get the two working for it and be very slow to switch them because your knee she's probably gonna at some point, um, start to slow down. Might be harder to get deals because more people are gonna get involved in it. Ah, and then you guys decide. Okay. Well, do I switch my niche? Uh, or do I switch my market? I would encourage you to start working within the market. That's close to home. I touched on this a little bit. It's closer to you know, the area. It's closer to you. It's easier to manage. Um, and just for the simplicity sake, when you start getting properties in other states and other provinces and you gotta get management, e, you gotta develop teams in those areas and you gotta be there and do that. That's a little more sophisticated than probably where you're at right now. So just start in an area is close to you. Don't worry. If the numbers the capri start working on that kind of stuff, just figure out you use that, right, but figure out from that what kind of nice you want to do in the market? And if it's appropriate and you will kind of learn that again by the PDC a process plan. Do you check? Adjust. If it doesn't work, you can decide. OK, do I switch my knee? Sure. Do I try different ways of doing it, or do I try switching markets? This is all a personal journey that you're gonna undertake. I can't really advise on that without knowing you and without knowing, I guess kind of your access to funds and your level of comfort with investing, so but that's just kind of a final word. You've got these in to see these indicators here. You've got these calculations, but you gotta do the work to tie it all together. Pick your niche, pick your market up to it. 11. 10 Wholesale Value & 4 Rules in Getting Started: uh so earlier I mentioned this idea of buying wholesale Selling at retail is the foundation of any business. This is where margins come in. So with wholesale, I don't just mean wholesale price, right? That's typical in our culture. Let's say an example of good example would be Costco, right? What happens when you go on calls? Costco is. You'll buy in bulk and you'll buy wholesale. That's the price for the Baucus wholesale, right? A lot of ah Comedian stores, for instance, by their so that they can sell them retail. Uh, when you're getting into real estate, the most important thing is not always the price, because you also have terms at play. And now that is where that's a portion of what value is. Value is also gonna be determined by the income the proper Brutus is. But the income in the terms are the value side, and that's separate from what the price is. The tour not always tied together. So just to kind of flesh that out a little bit, let's just take an example. So let's say, you know, very popular, especially in states. Is this black Friday, um, situation where you get toe. Go on, get these fantastic deals. First of all, you have to kill someone. Then you get these fantastic deals. You save like $100 on TV that you don't need. So this black Friday thing is fantastic, right? You get a neck spendable commodity like a TV that you can't get cheap ever unless it's outdated. But right now, this one do you get a chief. So that's a fright. A price focus. That's what we're kind of taught in. Our culture is toe always have people come down in price. Okay, with real estate, you've got more options now to kind of flesh out what I mean by that. Let's just take another retailer right here in Canada. We got tell us. I don't know if I don't think tell us is in states things just Canada. But tell us is ah, self let's say virgin. Okay, so a virgin mobile. Let's say you walk into ah, Virgin store. Right. Um, how is it that they're able to give you a phone for free? Easy. You know, this you sign an outrageously priced contract for for the rest of your life. Actually, Canada, They've recently amended the lot of you can we do for two or three years or whatever, but you sign the contract that states you're gonna pay off the phone on, and you're also gonna pay for the services provided by this company. So they're cool with letting you have this brand new phone. Let's say an iPhone iPhone stay valuable for some reason for a long time. Like they more so than other outdated technology. Once the next gen it comes in, it's still pretty expensive to get the old one. Um, so the way that they do this, they're cool if you'd taken it because they know they're gonna make the money up through monthly installments. That business model is different for most retailers, who are just looking for a quick sale before those products go out of style. Right? Um, these cell phone providers will get a monthly income, and we'll get the terms that work for them to secure that my monthly income. So the terms of the agreement allow them to not make money upfront, but get money on the back end. So that works for them. That's a difference in price, so you don't always have to get? Um, you know, the best price you can get favorable terms. So this all ties back down to the concept that we talked about earlier. About leverage, right. You can lift a mountain with a long enough lever at a focal point. This leverage that you're going to get by getting the right kinds of terms for your deal allows you to get wholesale values, even if you don't get wholesale price, right? That's really the point. I wanna try and let wash over you. It might not really sink in, and it's okay. Uh, like a lot of this stuff took a while for me to really get and helped to go actually do deals and see the money rolling and then be ableto put a context to the information. But just for now, keep in mind the power of leverage. Wholesale value comes from terms terms of justice more important, just as important, or even more so than price. They work together to get you the wholesale values. Keep that in the four for your mind, cause we're gonna get this five strategies of real estate investing. These the five strategies that all real estate investors use typically will use in different points in their career. Trying experiment. They did pdc a social do. So let's get those five strategies right now. As always, I like to lay out a few ground rules before we get into specifics is gonna be four major ones that I want interest to you now. These air rules more so than before we talked about principles, rules a little bit more flexible, these air. Just what I sort of suggest. I've heard it a lot of times. This first rule, I've heard a lot of times from different investors. Kiyosaki My my boy, They say You know what? Start simple by some single family homes and then move up to multi family later. Um, so my, uh, what? I would suggest one of the rules when you're just beginning your career. Investing is start with single family. Single family homes are easier to manage, their easier to obtain financing. Um, and there's a lot more exit strategies whenever you purchase the property. Whenever you get an investment, you always wanna have exit strategies. Think of it like this. Let's suppose you're in a room you've got, you know, you walk in the room if I ask you. Okay. There is a fire right now. Where would you go? You might not know if you've never been in that room before, but if you've been in a place that you you know, you know where the exits are, so you can safely get out of there. There's an emergency. Same thing with real estate missing. If you don't know where the exits are, you don't know what you can do to get out of it. You're gonna run the trouble real quick. Single family home. Provide a number of exit strategies. I list of fuel while ago. So first of all, you can rent the property. Eso your exit could be to sell to another investor or to rent it out. You can rent on the property. It's a strategy I'll get into a little bit. That's different because you're renting to the tenant. Who's gonna buy the property from you. So that's your exit? Um, you could live in the property. You could change the use of the property, selloff part of it, or just renovated and sell it for more money. Um, you've got multiple options in a single family home that you wouldn't otherwise get in. Maybe a commercial space or a multi family apartment building. Let's say, um, it's easier Teoh to sell, really? Because you're hitting a lot more buyers in that stage. What you really want to target, as a matter of fact, is this is what the millionaire really real estate investors do, is they? They don't target typically the lower side to see the C minus areas. Let's say you don't necessarily target the A plus areas. What they do is the actual target. The middle ground. They target slightly above the milligram, the B plus areas. B plus, Well, maybe not the people's property with me, plus areas that have, um, properties in them. They're not quite as nice as the other properties that they can turn around. These single family properties in these types of areas will give you the most exits. It'll give you the fewest amount of headaches. It'll give you the most about options. I would strongly encourage building your career around single family to start so single farm family properties just to title together. You've got more options to choose from. Um, you're actually diversifying. I don't even know if I mentioned that you diversify your holdings. Holy smoke. So rather than purchase one big apartment complex for two million bucks or whatever, you're putting a little bit of money into one property. You could do that again because if you've got some cash, you can buy another couple properties. You could buy 10 of these properties instead of 1 10 yen apartment building. And then you have different options in those buildings. Your diversify, your holdings, cannabis security there, Um, and the just the exit options. Right, Millionaire investors they're gonna buy these, uh, beat in these B plus areas doesn't really matter what kind of property they purchased. They could flip a F property. They can. They can keep in a plus B plus area. Get a discount. There's options, but just keeping it within those B plus areas. Single family homes are a great way to get started Easier. A lot of options that's kind of take away. That's why I would recommend the second ground rule for getting started in your investment career is to target go after only those distressed, motivated sellers. Um, I mentioned earlier the these 10% cap rates if you talk to anybody who knows what they're doing in real estate mentioned, you go. Hey, what about 10% cap? They're gonna laugh you. It's kind of made between the States. They won't because it would happen, apparently every day. Anyway, um, it's tough to get those rates of returns. Um, the only way you're gonna get it is if you create it. And the only way to create it is by getting someone who's going to negotiate with you. Someone is motivated to negotiate with you. You only want to target people that have, um, you know, maybe they have distress properties. I don't get into that, too. But not right away. Just focus on the sellers right now. They may have properties that they can't afford. They can't manage. Um, they might be going through some sort of emotional trauma, maybe a divorce, maybe a death in the family. Or maybe they just need Teoh move. They all of a sudden get this job and it's in another state or province or what? Having a double what they paid. Right now, they're gonna want to leave tomorrow, but they don't want to, you know, and keep the property rancid out because they don't care about that. They just want to move. So that's an opportunity for you. You've got a very short time line. Um, not really distressed, but they're motivated. Okay, So just focus on these kinds of sellers. It's the really the only way Teoh get the so far, what? I've been teaching toe fly. You got to get these people are willing to work with you and get those wholesale terms together on those deals. Um, I want to really emphasize, though what I just said may come across as saying Go take advantage of people. Don't do that. Don't. I'm not advocating, you know, preying on people that are down and out. The reality is these people have problems. You didn't do it. They did. It may be that it was thrust upon them by circumstances of fate. Whatever. They're in this problem, right to keep this problem from becoming a crisis, they're gonna accept an offer that's favorable to you because they don't really have any other option. And as a matter of fact, a lot of people can't make offers on these properties in some of these circumstances because they don't know how to make it work. They don't understand. Like they'll come in with a low offer. And the sources? Look, I can't I can't accept that low offer. I need to pay off the debt. I need to do this stuff. So they're in a situation where they need your expertise, your understanding. And as a matter of fact, investors take great pride in what they do because they're able to offer this kind of relief on the pressure that everyday folk feel. These these people are hard, honest, hard working, honest people and circumstances are such that they've made their life troubling and they need some help. So you gotta help these distress people, and they're gonna help you, because if you give them what they want, they're gonna give you what you want. That's the kind of relationship you're going for. So target these distressed, motivated sellers. Um, I'm gonna get into how to find these kinds of people later, but a lot of times it will say on the ad, the listing or the private add, you know, motivated, willing to negotiate, you know, in distress. Sometimes they actually use that they'll they'll they'll make it clear that something's going on. But in any case, whenever you call a property, you're gonna ask, you know, why are you selling? And you got to fuel out. They're gonna tell you something could be true. Might not just I just feel amount. Keep asking the question and see what's consistent. You might be able to find out. The real problem is going on there. You make your offer according to what you think is wrong. To try and solve that problem again, I'll get into a little bit later, but distressed the stress people. That's your focus when you get started. Number three don't focus on price. This is a tough one to get. But that's only because I haven't shown you how to do the math yet. I haven't actually gone through some deals and we're going to that shortly. But, uh, there is more to a deal than just the price. Don't buy properties. They're cheap just because they're cheap. Um, if you're running your numbers, you maybe you're gonna find a 10% cap rate just by looking at a property. Um, afternoon negotiations don't buy it. Cap rate is actually also connected to risk level. The higher the cap rate, the better the cash. But there's a reason you're getting more cash. There's more risk. You get a property just because it's affordable and you can make the numbers work or whatever you might be in for a huge headache that you don't want to take on. So don't buy just based on price again, stick with the single family homes in these B plus areas. Just get your feet wet right now And don't don't get fancy not. I don't want to tell you what to do. I think you should decide. You know better than I do what you should do. I've heard of people like I said, who in a year made you know, like $50,000 in passive income, like after a year they bought, like, 100 properties? It's totally possible it's gonna be those kinds of properties you're gonna get into. But my suggestion would be to start with something that you can make sense of. These B plus areas also have better long term upside for you, Um, so I would start there, but in any case, don't buy just because it's cheap, you can buy cheaper properties and make sure you get the right terms that work for you in the right kind of deal so that you can exit, actually kind of ties up into the fourth point. Technology earlier. Have multiple exits. Always have mawr than a few exits available to you on any kind of a deal. Um, the reason you want to do I mean, we've been talking about this whole courses about how to get into real estate. You want to get out as well, because things change. I've almost been burned. I almost lost, uh, like, 20 grand once because I had a deal that I structured with type of financing that I couldn't break unless I would pay that, uh, that Fiat I expected to hold the proper for longer. There was a fantastic opportunity I needed to liquidate and then move the capital. And, uh, I almost lost a lot of money. So circumstances change. Don't always. Ah, make sure that you've got eggs is available to you. Don't always paint yourself into a corner. I don't care how sexy the deal is. Um, it's like a bad relationship might look good in the beginning, but if it goes bad, you want out immediately 12. 11 Invesment Strategy # 1 Buy & Hold: Uh, okay, so you got the groundwork. You got those rules in the backdrop. Let's just dive right into the strategy. So these five strategies that investors used to make crazy cash with with little of their own money, we're gonna start with bite hold. Buying hold is, um, more or less your foundation. It's pretty straightforward. So you buy a property that you can rent out to produce an income that will offset the expenses and the liability, the mortgage. So we touched on that a little bit earlier. You want to buy properties based on cash flow? Investors do not care what what the property looks like, where it is. They don't really care about that so much as they care about what kind of money they're gonna produce. When they're putting money into something, it's to make money. They're buying an income stream. That's the nature of buying hold. So the goal for you is to, um, figure out again the right combination of wholesale price, wholesale terms or, ideally, both secure a cash going property, and this is going back to our principal earlier cash flowing property, um, find a way to maximize the income to minimize your expenses, get into a situation where you can control these kinds of things. Um, particularly the financing side cause a lot of deals hinge on how you structure the financing. So you know how it works. Where does it work? That's a really important thing. So again, I'm gonna go back that capri it that this ridiculous 10% cap rate? Where in the heck are you gonna get? 10% cap rate is what your agents going to say, by the way, so prepare for it on. Don't have to tell them not You might just want to move on if they start doing that to you . But anyway, you're gonna want to get into a market in which this cellar is going to be open to negotiations Now, theoretically, sellers will be opening negotiations in any market. What I mean, though, is you compare a property in a town like Toronto versus a property in a town like maybe Windsor, Ontario, which is closer to Detroit. Look, let's just say Detroit, right? You've got these two properties here. Um, which one do you think is gonna be more open to negotiations? The seller who's got a multimillion dollar estate in Toronto or the seller who is looking to give away a property for free and actually pay you to take it on one in Detroit or Windsor. Now that's going on Windsor. But, um, those those markets are different. If you to really secure the kind of returns that I'm suggesting these 10% cap rates. You're only gonna get that if the seller will work with you. And ah, and I will explain us in a little bit if their perception of their options is pretty limited. Uh, that's not gonna happen in a seller's market. It's only gonna happen environment. So stick with the buyer's market to make the buy and hold strategy really work for you. You can buy and hold on a seller's market to you just won't get the kinds of returns that to me really make it worthwhile to get into real estate. You can buy for the security. You're gonna maybe Lou not make a lot of money or even lose money to buy a proper internal that way, but get no position where you could make it. So you want to buy more of these deals and not just stick with one and wait for 40 years. It's not really very fun. Let's talk about the difference, though, between the B plus market. Then I suggested that you invest in versus these. Ah, he's you know, deep D markets are markets are really want to call him, so it is true. Ah, some of some of the pros and cons, right? So just starting with ease the D areas, you can, uh you can get rich real quick because there's lots of deals like that around. There's in those in those kinds of markets. You've got all kinds of motivated sellers. You got a lot of options. You can buy a lot. Right? Um, you're also gonna have probably the most flexible, most favorable financing. You could even get into zero down deals, usually properties that the seller just cannot deal with. And they'll give you money or they'll they'll give you the kind of terms to make its that you don't end up in a negative position like they did. You're gonna be OK. Um s That's what's called a zero down. There's also gonna be the downside to go with the outside, though. You got a zero down deal, the seller was defeated by it. Now you might be able to turn that property around. You're just starting out. You could end up with what's called an alligator. This is a property that you have to keep feeding because it just wants. That's relentless. You keep giving it cash, and it just keeps coming back for more. Don't buy an alligator when you're just getting started. I wouldn't encourage it unless you're really bold. I'm not really too terribly decree like I don't take too much risk. Like what I would proceed to be risk, which is getting into these tougher areas and turning around. If you're cool with that, if you can figure that out. Yeah, go do it. Go be rich in a couple months, like seriously online kidding. Go do it. Um, more downsides, though it's gonna be higher to ensure properties in these rougher areas. Some insurance companies actually price themselves out of the markets. They don't even touch it. If you can't secure insurance on a property that you put in, offering the bank won't give you the loan. They won't give you the financing. You get into a situation where you've removed your conditions to be able to secure financing, and now you've got a property that you can't get financing for. You can walk away from it. You will lose your deposit if you had to put a deposit in. And also the seller has the option to come see you because you've made an offer to purchase and now you're backing out. So it's a legally binding contract. They come after you if they want to do it. So that's again. That's headaches right again. Another point. Headaches. What are the chances that you're dealing with people that are totally responsible in taking care of themselves in these D areas? No. They're gonna look for every way to bug you or your management company. And the management company that has headaches is going to give you headaches because they don't want to deal with it. It's just a never ending cycle. You have to go back there toe, remove dead bodies. Just keep business as business, trying to get things all messy with these kind of deals again. I mean, this is my home. I have more or less my own personal, my own personal opinion on it. you could make it work. If you can make it work, go make it work. Lots of investors do. I'm just suggesting for most people, I think you would want to avoid this and start with something that makes sense. So let's talk about the B plus areas again. If you want to hit all four of those markers, you've got the appreciation cash flow, tax benefits, debt repayment, debt paid down. You get all four of those. You won't get all four of those in the D areas. Certainly not the appreciation. More than likely, unless it's a gentrifying area. All right, hopefully you're like, Yeah, I know what that means. So these, uh, these B plus areas, you're gonna have an easier time renting them. You're gonna have an easier time selling them. You're gonna have an easier time raising rents, which you definitely gonna struggle within those areas where people are renting for less because they don't have the income. Um, you've got you've got the ease with which to finance these properties. You get them insured again. There's all these kinds of benefits associated with it. In addition to the fact that you're riel rate of return. This is kind of the overall reason, actually, the real rate of return over time. Einstein said, What was it? Something about interest is that is the six Wonder of the world, man, I totally which that it's the compound in effect, the interest rate growth compounds. And when you have a few $100,000 property, even if it only goes up 4% that 4% is now gonna grow in the next year. On top of the 4% there. We grew at the rate of return on that. That growth doesn't involve any. You don't have to do anything for you. Just let it sit there and it compounds like mad cause on $100,000 most of which you borrowed. You get this appreciation just by buying a property good area. So let's go to the con. So the con right is obviously you're going to compromise a little bit on cash. Well, you're probably not gonna get those 10% cap rates. Hopefully, you're not down to the to, but you might not get 10 but you know, that's okay because you know you're paying down the debt, you're getting the tax benefits you got a little bit of cash, Will At least enough to keep you positive. Keep you going. You got the appreciation working on your side long term. So that's more of a long term stretch. Um, the other kind of downside is you might not be. You might not get as favorable terms. Um, you're probably have mawr responsible owners in these kinds of area, not responsible owners. Let's just say owners that have less fewer problems, less less of a distressed situation. Um, you're probably not gonna find it's going to be there exist everywhere, but is probably fewer. There's more deals in the deep. But if you were here, um, there's a few other problems, but that's kind of sufficient to give you an idea kind of the difference between those two markets. I leave it up ultimately up to you. Which one you want to explore? E. I'm just I'm just going to suggest that you stick with the B plus areas because of a long term upside, and also with the ease of getting into in just getting getting started, getting your feet wet. So you got the pros, you got the cons. Let's get right in the meat. Let's do an example. Buy and hold. Um, I'm gonna actually got an example. My phone. So I'm gonna I'm gonna reference that for maybe a little bit easier. What I'm gonna do with this example, though, is I want to really flesh out what I've been talking about this whole time. So time and talking stuff. Let's bring it out in the open for everybody. So, price versus value, we're gonna do this deal just a standard way not being creative. Then we're gonna do another way with favorable terms. Toe demonstrate that this leverage that you get with real estate produces these higher returns without you being without you using more of your own resources. Okay, so I'm gonna show you how we're gonna structure the deal differently. Same deal and get different returns based on terms. Okay, so, uh, here on my phone, we've got this example. Let's check it out. So got 48 Campbell. Have It's a single family home. So the ad you gotta love the descriptions. The ad says. Bright and spacious, well maintained, detached home on a 50 by 129 feet. Lot family friendly Western village area. Three bedroom on main floor. Um, plus two bedroom in the basement. Um, basement as separate entrance walk, uh, to train. Go station being downtown 15 minutes. See pictures. All this kind of stuff. Ah, a lot of times, there's gonna be a lot of, you know, sort of fluff in in the as a lot of puffery. Uh, don't concern yourself with things like bright, spacious, beautiful. I mean, what what you really want to focus on is the nitty gritty. This is when you're just doing your kind of your quick calculations, right? So see the ad. Just look for the price and stuff and then figure out from starting at the price that the income and expenses And I guess the price Look at those things. Figure out based on the quick maths, whether that you wanna look into it further and then worry about details that they're writing. Yeah, So, um, I guess First of all, the thing that point is, it is a 3 to 3 bedroom two bath. Um, it's It's the bread and butter property. The single family home in the B plus area is what you want to build your investment portfolio on. So that's what we're gonna start with now. Uh, this property, Let's start with your knowns right there. Asking $130,000. Uh, we've got two units. The ad here says that rents for $59 per month. So, um, the $59 per month these were going to your nose. OK, so you're $1500 per month per year, right? Sometimes 12 is going to be 18,000 rights. That's your average gross rent. Um, they're asking $130,000. So let's do the G r m on this. Right? So the G r m now you're gonna do $130,000 divided by the $18,000 which is your gross, the multiplier 7.2. So this is a little high. It's higher than five, but that's OK. So let's suppose you want to investigate this properly further because it's in the market you want. It's part of the niche that you've decided to pick. You're gonna You've done your due diligence already in the area. You kind of know what's going on because we gave you those indicators. You did your indicators. You know what's going on? You want to move forward this property? Okay, so the question is, based on these quick mass, do we find a way to make this deal work? To be Move on first. You gotta answer some unknowns you've got. We've got the GRN, but we don't know our operation costs. So what's the NL I write? What's the cash? What's the property value? Property values gonna be a function of the income stream. Remember, you're buying the income stream. What kind of what's So, in other words, the 10 10 extra 10 times rule. What's the value of the property? How much can you pay for it and still meet the kind of numbers that you're looking for? Um, that really comes down to your desired return, by the way, so you could do the 10 times or whatever, but you definitely want to get as much value as you can, or the value that you have in mind ahead of time, your desired value. Let's look in our constant. So you know the vacancy factors 5% 5% of the ah annual gross rent is going to be $900. So you're gonna minus that from your $18,000 year income. You're gonna take your effective gross now, because remember that your effective grosses the vacancy allowance plugged in your average gross rent minus your vacancy factor 18,000 minus 900 is gonna give you, uh, $17,100 a month. Uh, you're sorry. Less management fee. So we said we're gonna plug in 10%. What's plugging in? 10% of the effective gross. That's gonna be 17 10. You're gonna want your maintenance reserve begins. 5%. So looking, 5%. It's 18. 55 bucks utilities, Let's say for two units. I don't know. You know, I can't tell you exactly what it's gonna be a Western states. 15%. Right. So of effective growth. Eso It's 2565 property tax again. It could be reassessed. One kind of rule of thumb that you can use, uh, is 1.5% of the purchase price. The retail price, um, so point zero 151.5% 0.15 times $130,000 gives you 1950. That's gonna be monthly. That's going to be per annum. per year. You want to make it monthly in order to figure out your monthly returns, your insurance. We can just say it could be like 100 bucks a month. It'll change because if it's a rental, they're going to charge you more. Also, it's a rough area or really great area. Let's assume it's a great good, good area. So let's say 100 bucks, right? Our total annual expenses then, are going to be 7007. 30. When you had all those numbers up, the, uh, the net operating income, you're gonna take that away from your your average most rent minus your operate expenses. Not your mortgage yet. Keep that aside for now. 18,000 average gross rent minus your 7730. Right. That gives you 10,002 and $70 per year. Right, that's your net. So if we plug in our animal times 10 you multiply that number by 10. You end up with 100 $2700. That's the most you can pay for this property. Um, this also gives the cap rate of 10 and a G R M of 5.7, which is presumably lower than the market average. You're gonna average Aguiar infer that market because we started out seven point. Whatever it was, 5.7 is probably gonna be maybe even below average. 13. 12 Leveraging Your Buy & Hold Deal to Maximize your Returns: Uh, okay, so now you've got your monthly expenditure down. Let's take a look at some of the acquisition costs associated with purchasing the property . Right. So let's assume that you don't wanna pay absolute Max on the 10 X. Really want to get a little better? So you negotiated down a little bit. You got it down in 1016 80 because you want a bit of a buffer on the acquisition side. Right? So let's suppose you do 20% gain and banks are gonna wanna see 20% if you don't have 20% on this deal in the States. I think it's F h A loans in Canada, it's called CMHC. It's the king in Mortgage Housing Corporation. They will do what's called default insurance, right? So they will provide this to a lender to allow the buyer to increase their loan to value ratio from 80% to 90% covered by insurance. So if you default, CMHC is gonna go to the bank. Look, bank, we got this. Here's your original investment out. We're gonna go sue these guys have a nice day, and they're gonna take over the property and sell it for whatever it is that they want to sell it for pursuing you. For all the expenses associated with going through all that don't get screwed by the seeming. See, they'll get you. But that is an option. Teoh, get this property. Um, if you don't have 20% let's assume 20% though that's 20,000 and $36 legal fees and disbursements. This will range 1500 is reasonable, maybe 1700. So let's just use 1700 registration costs and fees. These are going to be the fees for registering a mortgage for changing title. All this kind of stuff. It's all included in the legal stuff. But I'm just separating for you. So you know, Title insurance, Property survey. Your lawyer is going to provide you with the option of doing title insurance if you cannot get a proper survey so I don't get too much in the detail. Their property survey is gonna tell you exactly what is going on with this property. What the demarcations are for it on the land. It prevents neighbors from trying to encroach on that land or sue you for encroaching on theirs. And it also tells you exactly where everything is. A lot of people don't have the property survey, so what you get instead of cynical title insurance is pretty common. Title insurance basically guarantees or protects you in case there's any of these kinds of discrepancies anywhere down the line. Someone wants to come and pursue you. You just pay that as part of the legal Leo cost. It'll it'll be included for you. The mortgage costs lending fees. Sometimes you're gonna have fees associated with different kinds of loans. Most of time, a mortgage broker will work for you for free and get paid on commission by the lender. That's typically how it works. I always like to just include a couple 100 bucks. They're just so it's there because you're never gonna get everything exactly right. So I just include it anyway. 300 bucks. Let's just put that inspection. I went high 400 bucks appraisal. If I got the bank loan, I probably didn't pay the landing fee. I'm probably gonna pay for the appraisal. Let's just include the appraisal. Another 100 bucks land transfer tax can range in Canada from 0% to 1.5% of the purchase price in Toronto. We have a double taxation. Let's just assume 5 $1026. So the cost of clothes telling up all those lovely expenses that we discussed 24,662. You're gonna need additional cash on hand. I wouldn't say that this would be part of your closing costs. You could just say it's a reserve. Ah, a lot of times we get into Ah, property, especially a rental. You're looking at about five grand and repairs to kind of just right off the bat, maybe 5 to 10. It's always a good idea to budget an extra five 1000. You might not even do the rounds, and I just fill it up. Or you might ask the seller to make it sure that it's tenanted. You could negotiate that in the deal. Let's just budget 5000 keep 3 to 6 months worth of the cost of operating the property set aside six months is probably good idea. Let's just say it's five grand, right? Keep another five grand aside, is just an easy number to work with these. These two are your reserve funds. You should always invest with reserve funds because you just never know. I'll give you a great example, because on my first property, um, a few years ago, a soon as I got the keys to the house, I lost my job, like, literally the day extras the day before my Bosco's. Tomorrow is the last day he shut down. I was out of work. Good thing I got the keys already. Looks the bank couldn't do shit now. Okay. Um, anyway, so I lost my job. It can happen, but I had reserve. Fund says that's one of the things I did, right? My first deals. I had a lot of cash set aside just in case. So keep those reserves in mind. You never know when it's gonna happen. It could happen. You happen to me. Happens to people. Just prepare for it. Don't Don't get caught with proper you can't afford. If there's a vacancy, you can't fill it. Something happens. Just just keep it aside. So if we obtain 80% financing, we'll be looking at $81,344. Right? So last time we did this, we're gonna do it again. We did this example already of the James Bond we plug in James one. That means that you're going to get $569 a month attributed to the cost of borrowing that ends up being about $6833 per year. So you're gonna subtract your Anna? Why, Right? As we said, we're saving the mortgage for later. So your mortgage now you're gonna get the inner wise. Track that and end up with your cash flow, not your net cash flow. When you subtract those two, you're gonna end up with $3437 per annum, which is a 14% rate of return based on the cash that you put up to get into this investment . Okay, the 20% plus your closing costs. And so the way you're gonna cocky that return, obviously divide your cash flow into the amount that you put in, total your total cost toe, get into the property, and to carry it. That's gonna be your rate of return there. So on the face of it, it might seem like 14% is a pretty good rate of return. Certainly when compared to other investment products out there like Canada. You know, popular choices. Mutual funds are ESPYs on that note? Don't buy those. Their scam. My opinion. There's cam. If you got them, um, find a way to get him in a real estate. We'll talk about that as well. How you can do that will be later, but basically 14% might seem attractive with regard to real estate. Those something different going on. You're not just putting your money into something and forgetting about it takes work, you gotta maintain it. You gotta manage it or you gotta manage the managers. You've got to put a lot more money in and you got liabilities. You've got exposure. You've got potentially headaches with tenants, or or, you know, you may have problems to solve. At some point, you gonna renovate something or you gotta sell it and whatever. There's a lot of stuff involved, real estate investing you won't get with a mutual funds. You just give to someone and then you call it a day. 14% might be good as a rate of return when compared to that product, but the work involved tells me it's not. I really wouldn't recommend it it's not very fun to do that. So the question is, you know, let's say 30% is like a reasonable rate of return, which, typically most investors will go for anything less than 30. Not so great. Um, let's suppose we take this example right Is a straightforward way of doing it. You put it down in, you got the property. Didn't really negotiate much. You pay them what they were asking. Whatever. Right? Well, you'd pay over there asking you didn't get a tremendous discount. You got a discount, you could work with eso. How can we structure the same deal on and make it so that we get a higher rate of return without and also reduce the amount of money that we actually put into it? So the way to structure this deal is to get 70% financing from the bank and 20% financing from the cellar. You might think Well, if a seller selling, how can they give me money to do deal? Well, they might actually have a lot of options. Let's you'll never know until Yeah, so let's kind of look, look at an example. So if you had structure this deal in such a way that you got the 70% mortgage on the purchase price. That would be 71,001 or $76. So multiply that by your James Bond. You've got 4 98 now promote. So it's less than what it was before. Now you got this 20% monthly with strategies called a vendor. Take back. So what happens here is the vendor doesn't sort of get paid all of the money. They take back some of it on the sale in the form of a mortgage, they become like the bank they provide, um, that equity in there so you don't have to come up with it too close, But they're gonna charge you each month, just like what the bank does. They provide the equity they charge you each month. Meditate back is a similar strategy that the banks used to make money. However, in this deal, it's not gonna be as favorable to them as it is for the bank. You're gonna ask for the right combination of terms secure the kind of rate of return you wanna get. So let's say, for instance, in this deal, 20% is gonna be 20,003 and $36. Let's say you offer them 3% the rate that you pay out in that mortgage now each 1 to $71.17 . So added to that for 98 23 that you budgeted for for the bank loan. So you got your 70% mortgage from the bank. The 20% now is gonna come from the vendor, the seller in the form of a vendor take back. So because they're a flexible seller is the type of person you've been targeting. You're gonna make sure negotiate the kind of terms that you need to secure the kind of income that you want and you know they get to win to begin a monthly fee. But you're looking after you, so you're gonna try and get to be a little more favorable. Let's let's just assume that you offer them like 3.5% or something like that. So you could you assume 7% for the bank Double seven. Let's do half that for the vendor. Take back. So you're looking at about $71.17 so you add the $71.17 to the monthly mortgage you calculated using James Bond for the bank loan at 4 98 23 cents. Those two together times 12 gives you 6000 and $33 per year, so we still end up with pretty much the same numbers as before, Right? We've got $3437 in cash flow per year in the first year, but something significant happened because you've now put down 10% instead of 20%. You've nearly double your rate of return by putting half the amount in. The return now is 23.7%. That right there is what I've been trying toe flush out for you all this time. The power of leverage using your less of your own resources more someone else's increases your rate of return cuts down a little bit on your risk, using less of your own cash and gives you the opportunity to do more deals. Because you've got less of your cash side in this one, you can use it on something else. That's the that's the principle. But that's what the millionaire investors do, you know, if They've got lots of cash. They're still borrowing like crazy because it makes more sense to do it. They get a higher rate of return, less of their own cash tied in. More options to you. More deals. I want to point out something real quick. You go to the bank and you tell him I got this terrific deal. Guess what? Um I know you're gonna ask me for 20% Teoh or 30% to secure this property. My own money in the game. What I'm gonna do it stays are gonna have the seller provide some money, and I'm going to put 10% down. That way, I make more money. How does that sound? That's a great way to not get alone. If you tell the bank that you've got vendor financing, Um, they're just not going to give you a loan, so I wouldn't suggest making that their business. Um, all you really need to do see, the thing is is kind of a gray area. I don't consider it lying. Um, I would say the bank only has a certain requirement when it comes to your financing. They want to see a proof of down payment, right? If you've got that money in your bank account, that's what I call prove down payment. Doesn't matter if it's the vendors at this point, you've got enough cash to take over that loan. If the vendor is something happens with that. Additionally you Are you buying this property using the system that we taught you? We've taught you. You gotta have exits in place. If you get this property the right way, you get it under market, right? You've got vendor financing in place. You've got it tenanted. It's a cash foreign property. You've got enough. Security's in place that you should be able to handle this property. Right? You've You've done the due diligence. You've done all the work to set it up. The bank just wants to get paid. Let's just keep that the focus for them. You could also, as another way of getting around this mentioning the VTB. You could always say that you are partnering with someone who has got the cash provide their proof of down payment. Um, you could say, you know, you could also use what's called a gift letter. So if you have ah, family member that can demonstrate that they have that cash you could say. Okay, well, look, the my my family is gonna provide a gift letter. They're providing the funds for the down payment. The bank doesn't really care. They're not gonna investigate that further. Just go. Okay, that's perfect. Good. But for some reason, if you mention the vendor take back there, they're losing their minds. At that point, just not worth mentioning. Be responsible. Don't go around lying to people and then getting into deals that you can't control. Um, it's best to start off your career trying to use as much your own money as you can t get your feet wet so that you can start borrowing people's money responsibly. But I understand if I don't have that cash. Ah, just make sure that if you do this deal that you don't screw the bank and yourself by having all fall together. If you can't control it, the vendor take back is actually kind of interesting. Ah, lot of the type of people that are gonna do a vendor take back typically are going to be people that have some investment experience. So they're probably gonna be multi family um, property owners. They're gonna understand the concept, and they're totally cool with receiving monthly payments that works for them because they're used to that. Right. Um, vendor take back. They're not too popular for the average mom and pop kind of deal. If you've got, uh, the average cellar, they're not understand what it means. Their agent is definitely gonna understand what that means. They're gonna be scared. It's just gonna be It's not gonna work. You want to save the VT Bees strategy for certain types of sellers? Always suggested, like always asked, by all means, just, you know, don't expect that it's gonna happen as frequently. The single family homes with multi family, the type of single family people that are gonna go for it will probably be retirees. That's because these types of people are looking to downsize. They don't want to have the property. It's got all those stairs or what have you, Um, and they want to sell the property toe, have enough money to finance the retirement. The thing is, though, you can offer them the opportunity to collect a monthly income to support the cost of their retirement, Um, without having them take it all at once. So the retired single family home owner all there after, if all they're after is just a retirement income, you don't have to purchase the property and give them back their equity. They can keep it tied into the property and receive a monthly payment to achieve the same goal. You're probably gonna create a situation there where you're paying them. They're just direct principal reduction payments. So rather than paying the interest on this loan is direct principle. The reason why this would be a benefit is because the retiree is looking for something secure. They want to get reliable monthly payments. They don't want you to accelerate. Pay back the loan. They want something, they could sit there. Watch, too. If if you get a zero interest loan, you just tell the rules. But look, I would be insane to pay back this morning. It zero interest, I'm gonna keep it for 30 years or whatever you negotiate. Ah, and so you get the benefit of having the principal reduction payments. They get the benefit of the security and the reliability of monthly payments. Security is the property that they already understand. Everybody wins in this scenario. So that was the type of people you want to look for 14. 13 Fix and Flip Properties: Uh okay, so that's kind of a snapshot of the buy and hold strategy. The next one is popular. Fix and flip. Everybody's seen these shows on h G T v. You get a couple of professional guys and they fight each other for whatever reason, they turn a proper around in three minutes. Everybody makes money. It's all good. You probably also heard of those. Ah, disaster scenarios. People buy a property before they've got a plan of how to renovate it. Oh, you mean the budgets going to be 40? I thought I was going to 20,000. Right? This kind of thing is pretty popular, so you need to create a way of doing this securely, actually going to create we've got a four. You look at you, you need to do the fix and flip way different than the average kind of a person. So we're gonna we're gonna break that down for you. But the idea here is you want Teoh by in this case, this is gonna be a distress property, perhaps also a distress seller, because they got a property that's distressed so they probably can't take care because they got financial woes or what have you, Um, get the distress property. Get as good a discount as you can without killing the other guy. Um, get that under contract. Uh, lock it up and get it closed as soon as you can, because you want to get to work on this thing right away. In the meantime, you're gonna have to figure out your approach to financing this deal. There's lots different routes that you can take eso again. Like the last example. We're gonna look at this, doing that straightforward way they're gonna look at doing in a more creative way to show you the difference in returns by applying leverage rather than your own capital. Where is this strategy gonna work? It works in different markets. I would see just sticking with, um well before we touched on a little bit. These areas that are gentrifying you, Congar. Oh, for that one. Teoh, get the higher upside potential. But if you stick with these bread and butter properties, these B plus neighborhoods, that's going to really be the probably most secure way for you to do it In particular, though, you're gonna look for areas, avoid the areas first of all that have. You know, you got a car with four cinder blocks under it. You've got driveways that are just riddled, literally littered with different kinds of cars, flat tires, toilets in the one, um, you know, these kinds of areas where this is the norm is not the area want to be in If you find a property like that in area where there's mowed lawns, Um, you know, you've got, you know, like swings or like tire swing that shows that there's families there. They got brand new cars, and there may be there, even clean the cars outside in the driveway. This shows that these people care about their property. They care about the car. Probably better property, too. Um, it shows that this is an area of pride and area that's gonna attract young, fresh, proud homeowners that are just aching to give you more money than your asking for on your property. Get those. In other words, the kind of old fashioned bit of wisdom is, um, you're looking for, um, the ugliest house in the nicest neighborhood. That's kind of a good rule of thumb. Get the get the get the one that's ugly. Don't get the one. That's nice. You got no room to go there. Get the ugly one. Make it look nice. This is the home where you need to do. Okay, So, uh, you're gonna want to get, uh, five comparables of the after repair value. It's known as the air V of properties like this one within a one kilometer sort of radius. Um, you're five. After a pair values, you're gonna get those together and you're gonna add up their, um their sale price. Right? Get yourself an average of those five altogether will tell you a target for that market of what you can expect as faras renovation, the completion of renovation on this kind of properties. What kind of yield you're gonna get from that? The next thing I want to do is do similarly get five comparables of properties that are in a similar condition to the one that this one is in. Uh, why would you want that? Because you're gonna want to make an offer on this property and you're going to make an offer. Um, sort of Within that kind of spectrum, you definitely want pay too much. You want to know that, Um, but you could offer pretty much whatever you want. It's just a good idea to get an average that you know what kind of a deal you're getting just for just for your own sake. You're also gonna want to check out, uh, the days on the market that's gonna be indicated for you on the offer. The the offer that you're looking at, the listing that sold is going to say at the top D. O M. Days on market. You want to find kind of an average of those because you want to get an idea of how long you gonna be holding on in this property will help you with calculating your carrying cost each month also help you to calculate the interest that you might pay If you're going the fancy route, which I can explain later with private money. It's expensive to carry those that interest rate that high it straight for a long time. So you want to get ideas for sure. We're gonna get broadly speaking. You're gonna be looking at typically four months from the closing of the purchase side of the property to the closing of the selling side. So when you purchase it and it closes now you've got the property right closing. When you see between the cell and the clothes on that property, you're gonna want to make sure that that's around the four month mark. But you're gonna calculate all of your expenses based on six months, not four months, because sometimes markets cool off something that happened while you're holding on the property. You just want to prepare. You could, for instance, during the renovations, find a major problem, and that sets back a bunch of other renovations. You do or you need to get custom stuff that takes a few weeks there. Delays all the time, and there could be marking additions that delay the sale. Prepare for it. Six months. That's gonna be your range for this type of property. This type of deal 15. 14 Fix and Flip Properties Spreadsheet: uh, let's get into the fix and flip spreadsheet first. The really important part with anything that your doing investing is doing your due diligence and there's different stages of due diligence. But when you're getting started in your fix and flip business first with a few things that I know so first of all, you want to obviously know your market. Find what types of properties are selling and why. Different markets have different kinds of demand, so you want to find out for sure before you start going on buying properties. You know what kind of properties are selling right? So is their need for smaller, affordable homes in your area? Or is there a demand for higher and renovations in space? Properties will have different lot sizes Sometimes is going to be a pie shaped lot, and it's tremendously important. Other markets. They won't really care so much about the actual dirt as much as they do about maybe the heated square footage of the building itself or even the location right? So you might have homes in the middle of nowhere. Lots of land you might have. Other people want to live dead center downtown wherever kind of marketer in those kind of things were very as well as things like obviously attached detached condos, town houses, bungalows, three story homes, the bedroom size they're gonna matter some people. Three, sometimes three bedrooms is the key. Other times you have larger families. Or maybe they're looking for extra space to produce income. So, like five bedrooms rather than three or more important, multiple bathrooms. Sometimes garages are important and higher, and areas where you wanna keep their super nice cars, obviously out of plain view some areas they don't really care too much about garages, parking, maybe a big issue. Special features, like sometimes people will buy just based on the actual school district because they won't able to get their kids into certain schools just by being across the street from another neighborhood. So I mean, that's kind of getting into a lot of detail. But just so you know that there there are different factors at play, So once you get your homework done and you'll need to get get in touch with a realtor who works the area knows the area you're gonna want to find out. Actually, three mean things, So number one you wanna know the after a pair of value of properties in the area, you want to get five comparable properties in the area that have sold, not the ones that are listed, because whatever properties listed for is irrelevant to you. It just matters what people are actually paying for these properties get the after a pair of values of properties that are similar within the last few months, not not much more than a few months, because the market will depending on kind market. And it could change drastically. Get those recent update ones you can within a one kilometer radius of the area that you're targeting. Get five comparables of UNR elevated properties is that you have a bit of a margin toe work with you understand? The margin of profit isn't your investment. You want to know obviously the average days in the market as well, because sometimes properties will sit on a market for a long time. That could be typical free area and other markets like Toronto over its and sometimes the listings don't even make it to market. They just get on ambush of bids. So you want to know how long properties were sitting there and what kind of, ah hot or cool market you're dealing with. So there's a kind of three most important things. We'll provide a sheet so you can follow along and find your averages for the comparable sales and do your own due diligence but kind of getting into the spreadsheet itself. Here, let's again put down address 123 anywhere Street. Let's because we looked at a lower price point for the buy and hold example. It's looking like the higher price market. Let's suppose you've got your comparables your your five. After a pair of value properties probably been renovated already, there's no more work left to be done. Let's suppose the averages about foreign 1000 for the market you're looking in straight off the top, just like how you manage your gross income on a on income property. You're looking at the numbers based on the effective growth, always so you have a similar buffer here, and that's the anticipated selling price being 95% of your five comparables. The reason why you want to give yourself a 5% buffer is because if during your renovation from the time you acquire the property the time you're looking to list and sell. If something happens or you know it may be personally, you run short of cash or you need cash all of a sudden, or maybe the market shifts or whatever you want to be. Ableto get a quick, clean sale and provide the buyer with a discount to motivate them to get that sale done as quickly as possible for you to leave that little little buffer in there in every case and based your numbers on that number and not on getting the after a pair of value of the five comparables that you've brought up, even though you probably will just keep that buffer in there. Let's again assume a deposit. 1000 bucks on a given proper. You're looking to get here. We have the cash to close, so cash to close actually means everything. It means down payments, closing costs and all that kind of stuff. But here it's broken up into two parts. You have the closing costs listed here and the cash Tico listed here, so that's just gonna be your down payment on a property. So let's suppose you get a property at, like 300,000 bucks. It's $100,000 on the market. I mean, cause whatever it is that you end up getting the property four, it could range. But let's just in this example, say it you found when you got it for $300,000 Right? So for this first example, we're gonna assume 8% loan to value. So this is just a traditional banks loan to value. So this is it going in it yourself? You've got 20% down. You're good to go. So 20% of 3000 you know, it's 60,000 bucks. So your deposit plus the remaining cash too close. It's going to be 59,000 because remember, you deposit rules into your down payment so you've got 60 grand, so the mortgage amount was a $300,000. So let's assume you want to get a $300,000 purchase price. Let's assume in this example that you're doing a 80% loan to value traditional loan from a bank. You're putting 20% down your borrowing 80% of property. This is just kind of the average way that most people think of how to do deals. So if you've got 80% of a $300,000 property, let's say you want to buy a property three and thousands, so 80% is gonna 800.8 times 300,000. I'm just doing this on my iPhone calculator. So $240,000 Which means that your remaining amount your cash to close is going to be in this example your down payment with the other closing costs. So again your closing costs right, you're gonna be looking at legal fees and disbursements. You've got your registration costs and fees for mortgage title insurance You're probably going to get is not a lot of property owners have the property survey, but always asked for that asked property survey. But you probably look a title shirts. You're gonna have inspection costs. Probably. You're gonna have an appraisal. Potentially. Maybe the bank doesn't want to pay for it. You also have your land transfer taxes, and you're probably just some miscellaneous fees and costs. Associate with that. But typically this little number, this this calculation here plus or minus 2% 2% of the mortgage amount. That's about what you're looking at for closing comments. So again, your deposit, We're just doing 1000 media deposits. $1 maybe $2 million. I don't know. Just do 2000 for this example. That's a point. Negotiation between you and the seller, so they're making cash to close is going to be your 20% down. So we said we're buying it $300,000 So that means you need $60,000 down. So $60,000 minus 2000. Because that's gonna roll together is gonna be 59,000. Okay, so now you've got your purchase price here. So be is gonna be $300,000 your purchase price on a property that we have done our due diligence side, and we expect to sell for $400,000. We're gonna assume $300,000 to get that 5% buffers. So the kinds of appears you're gonna do and the kind of working on doing a property is always gonna depend on what kind of marketer and I would encourage you to have a little bit of integrity, a little bit of character here if you don't already. I mean, I had to learn to get to that point. But do your renovations to kind of a middle ground. Do you don't want to do the top end renovations? Maybe you don't do the super cheap stuff that's gonna fall apart. And don't do the renovation yourself. If you wanna have a big headache and a second job, that doesn't pay very well, you do the renovations yourself. But we're doing this in a systematized way where we're getting in labor. So get the middle ground labour. Get the stuff that requires a particular skill set. Hire people just for that subcontract out the other stuff. That's just mine. This stuff carrying out trash, you knocking down whatever wall or whatever it is, that's all stuff that could be done by teenagers that either the contractors will have or you can find yourself. Obviously, make sure you still get insurance in place. They have their proper insurance that covered Anyway, back to this, so repairs they're gonna range depending on what kind of property you got. What kind of see the properties in what kind of market you got? What kind of deals air going on it? Ah, Home Depot, all that kind of stuff. Let's just assume for the sake of this example to cut down on time you got to the property , you expected the renovation to be somewhere around $40,000. Maybe you bring a contractor with you or someone that you trust to give you an idea. If you don't really know, that's what I did. I took my mentors with me to sites toe Tell me that. I mean, these guys have been contractors for years, so they give me a pretty good idea what to expect in terms of cost. You'll get quotes later when you actually of the property under contract. But for now, this is just the offer stage. So you're figured out your numbers at this point other. We're just gonna leave alone because as far as we know, just for the entrance, we're not doing any special things on this. This is just a straightforward you alone doing this deal so we can leave other for now, mortgage payments. So again, you're gonna wanna for most renovation projects, you're typically looking between 6 to 8 weeks to get it done. You're also looking at about 30 days to close. It'll take about 30 days or 60 days, which is more typical. The time it takes to sell is gonna be from the listing date to the time that you actually get an offer accepted and that can typically be on a week to eat. Depends on what mark your little, very and super hot market like Toronto. It's a day or maybe 68 7 days, max. So your mortgage payments you can find out online with mortgage calculators. You don't need to do the double 07 method here because the double 07 method the 7% interest is just for the longer term hold properties. In this case, you're looking to fix and flip within a few months, so just find out what your interest rate is right now. There's a chance it could. There could be a correction or adjustment. Typically, they won't go above. Maybe a percentage 0.2% points is very rarely go, like six or seven points higher than what it is right now. So you will be probably okay. Just base your numbers on what the interest rates are currently or not whatever you want to do. But I just go based on what the numbers are right now, and hopefully they don't change too much because you're gonna have buffers everywhere else . Like your 5% until it s so mortgage payment on a $240,000 loan At today's rates, 2.8%. You're looking that probably Anna, like around, uh, 1100 bucks. So oh, for but for six months. Excuse me. So I'll be 6600 property taxes for the year. Let's assume that the property taxes for the area or somewhere around 2000. So let's just say 1000 bucks, six months, your utilities and your water. Those are going to be low because you're just in there to do work. You're not. It's not tenanted, so we're not gonna be terribly high. It's going to depend on what kind of market you're in and what the cost of the utilities are and all that kind of stuff. But let's just say you could just say probably 100 bucks a month for six months plus water , which is super cheap. Let's just say when I heard about it probably would be like 20 bucks for two months. Let's just put 100 line snow Main instance. Assume you maybe you're doing Mila winter. You gotta hire some kids to Shelby your driveway. Prevent lawsuits. 200 bucks insurance for the year is going to be somewhere around 1000 bucks or something, so you can put in 500 bucks. There's not gonna be management if you're doing a condo, you're gonna want to be aware of the condo fees before you get into the deal. Sometimes they can be 100 bucks, and that would be 700 bucks in her bucks. Some kind of crazy stuff like that. Typically, the older the property, the higher the condo fees because there's more things to repair. We're just going to leave. That is that That's fine. We're just assuming a single family home in this in this example. Okay, now, next. So you got your holding costs about your purchase costs. Now we're looking on the other side cause you're gonna have to prepare for the exit on this proper year is going to cost associated, right? Assuming you're not using com free, I mean, even if he's confident going to pay a little bit of commission. But assuming one do is right you want to get as many potential people through your door looking at the property. You wanted this thing marketed heavily crazy. The best thing to do is to go to the source, their brokers who make a living off this. Your real estate agents. Let them sell for you. Negotiate a commission that makes sense. What makes sense can be so you've got your listing agent ago selling agent. Typically, I guess 4% total plus HST would be kind of ah, reasonable number, depending on what kind of market you're in. That could be reasonable. Maybe it goes down toe, maybe 1% or +15% for listing and 1.5% for the buyer's agents. That'll be 3% plus ages. T. That's a point of negotiation. If you do work with one agent and they're getting your great deals, you could have them on the buying side for you and on the listing side for you and reduce their commission because you're doing more volume with them. So there's all kinds of ways that they could work out. Let's just say 4% just to keep things simple in this example. So 4%. That's going to based again on your selling price. So assuming yourself for 3 80 you're gonna multiply 0.4 by 380,000. So that work set to be 15,200 which is a lot of money. 15,200 you're gonna add in your in Canada, we have the HST harmonized sales tax. So 15,200 times 0.13 Because give me an extra two grand. Let's say so. Let's just make it an even 17 grand. Right in commission roughly. Okay, So 17,000 bucks, right? Not bad for listing a property. You took all the liability on okay, Advertising that's gonna covered by the agents unless you're doing yourself income. So in some cases, you may be in a really nice position where the owner of a property that's been neglected is interested in selling to you, and it's already tenanted, and the tenants, maybe they want to move out in six months because they're looking to buy themselves, were looking to do whatever it is. So you close on the property and you've got maybe four months duration with the tenant still in while they're looking for their own place. So while you're renovating, you would want about a month because you don't want the property sitting too long. You want to get renovated quickly. So let's just say you keep the tenants in there and you let them know. Look, I'm gonna be selling this property at this date. I need you out of here by this date. So you collect a couple of extra months and rent from one part of the house while you're renovating the other parts of the house. That can also be an angle Frito to use in this example. We just keep it straight, though. We're not gonna include that. This is just a straight your purchasing a vacant property. These you're carrying costs and like that. So this spreadsheets gonna do the math for you? So already we can see here that doing the deal this way, it gets you a 5% cash on cash return. So just to run through it, the anticipated sale prices 3 80 Purchase price 300 purchase cost for 46,000 and you're holding costs 8400 plus 20,700 to sell. And you're probably gonna make more, but you're gonna want to base your numbers on what you got here. So so far, 5% for four months, work and all your liability and stress. 3000 bucks is not a very sexy profit. So you already know that you're gonna have to get in this property at a better price point . So that's one of the things that the spreadsheets gonna tell you. Maybe you think that that's a sweet deal, and actually, that's typical of fixing flips. That money gets eaten up super quick. You can have maybe a $60,000 profit, and then $20,000 gets eaten up because things were delayed by a month because maybe you need a special kind of garage door. It doesn't come in. Or maybe your contractors you had lined up bail on you midway or they get too busy to two over committed and they can't come out and you gotta find other guys. And then who knows what happens? There's all kinds of ways to get eaten up, Or maybe just a unforeseeable event. You open a wall in all of a sudden, you gotta replace electrical. Anything happened 16. 15 Lease Option: Uh, okay, so now we're going to get into a strategy which is a hybrid of the first to have given you so kind of combination between the buy and hold strategy, the fix and flip strategy. This one is known as Lease Option, also known as a rent to own. There's kind of minor differences between the two, but let's just stick with the title lease option for now. So lease option that we think of it is, if you've ever, for instance, leased a car right, you don't own the car, but you control it and you make payments towards it over time to become the owner. It's the same concept here, so the idea is you're looking to purchase a property. Instead of getting tenants in there, you're gonna get what's called tenant buyers in there. 10 buyers are people who can't quite qualify for a loan a tous point in time because of some part of their credit history where there was just a meter blip so otherwise they've been pretty good, But something happened. Usually, you know, life happens is some kind of ah emotional personal situation. Eso, for instance, Maybe there's a death in the family could be a divorce. Uh, I mean, a lot of times it could just be that they were just kids and they didn't know any better. They got into debt. No one told about a handle money that happens often. But now, for instance, maybe they have a job in mining. So the, you know, they got into trouble with credit at their late teens early twenties. And now they're 2123. They've kind of figured out their income situations a lot better than when it was. Now they can afford payments. So in other words, the tenant buyer is going to be the type of person who has a healthy income. They don't have 20% saved right there. In about 10% saved, they probably only have about five. You want to look between 3 to 5% for their savings For a purchase price of your 5% of purchase price, there have a little bit savings. They're going healthy income, but their credit is gonna be in the tubes S o r. Down the tubes, wearing expressions in the toilet damn tubes. Anyway, so the the tenant buyer is going to take this property, You're gonna buy it. They're gonna take this property. They're gonna They're gonna live inside it. They're gonna pay you rent. They're also gonna pay something called option credits. These credits are going to be the portion that add up towards part of a down payment at the end of the renter rental term. The other component of that down payment is made in the up front payment based on their savings. This is why you wanna have the 3 to 5% savings that's called the option deposit. Now, the language in the world investing this this idea of option is something that you can buy . So typically, let's say, with stocks, you by, um, a stock option on your option could be either a call or a put. So when you purchase a call option, you're expecting the stock to go up in value in a certain time frame. If you buy a put, you expecting the stock to drop within a certain timeframe? So that movie, the big short, that's an example of a put. So they shorted the market. Um, and they made a profit on the If you watch the movie, the guys who shorted the banks. They made a profit anyway. So that's the That's the option. Right? So this option deposit, it's nonrefundable. It's paid to you. It has a couple functions. So first of all, it gives you an exit. Right? Um, it also gives you ah bit of security because the tenant buyer has skin in the game. So just like how the bank wants to see your down payment, That's their skin in the game. Now they've got something lose. If they drop out of the program so immediately, a lot of people ask. Okay, well, they're very suspicious. Typically, Realtors who don't know this strategy I've interviewed some of the reaction is usually Well , why would you wanna deal with that? And usually they're saying this because they think that you're up to no good. Um, the reason you do it is because there's still good people. They just had an issue along the way. And now they can't buy a property, and it's gonna take them three years toe, be able to buy it to be qualified for a loan. So in that time, property values go up, they're not gonna have any option to improve anything and benefit from that. Um, So you're stepping in and saying, you know, Look, what we're gonna do is we're gonna purchase the property. We're gonna go on title, they're gonna run it from us. We're gonna give it to him at the end. Um, and everybody wins. In this scenario, I really want to emphasize the importance of the option deposit, because this is your exit strategy. Uh, you Some rent own companies do, uh, zero. They don't require an option to positive require any fees up front. Uh, you don't want a structure your deal that way, Not only because it's a risk to you, but, um the whole idea of the option deposit as much of the benefits you is to help this tenant buyer get into a property in a shorter time frame between three and five years. Ah, in those deals and they have no option deposit, they're gonna be paying outrageous option creates each month, probably not be able to maintain those payments. And they end up forfeiting all the cash they've invested in this property so far. So it's very easy for unscrupulous investors to take advantage of desperate people in these kind of times. You're not gonna be one of those, but that does happen. Um, you're also gonna want to have that kind of story, because as you talkto 10 and buyers, they're gonna ask it. Well, I've heard that you don't need a down payment, and you can do this. And this and this Got to reassure them that Look, this is how we do it. That option is available to you, but we do it this way because we see a greater rate of success for our for our clients. Um, which is true, So option deposit. This gives you three exits. Number one. Let's suppose you get this deal. You close the 10 and buyer disappears, right? The whole idea with purchasing this property is different than how you do with other properties. You pretty much just buy whatever property want. You could still negotiate down a bit of a price. And, you know, that would be a benefit to you and to the tenant buyer. But typically you don't really? You just send off the tenant buyer with a realtor, they find a property like you just sort of clothes on it where you go. Um So let's assume that's the way that it's gonna be done for you. In your case, this option deposit because you bought this property pretty much at market allows you to sell this property if you really need to and handle the costs associated with selling. Um, so definitely important for that reason, another reason is let's suppose you know, you go through the rental in term for maybe a year. So are a few months. Uh, and it happens. It has happened before where the tenant buyers end up getting divorce midway. They think maybe purchasing property is gonna fix their crappy life. And it doesn't. It makes it worse because a lot of stress involved a lot of work on the relationship falls apart. They split again. Now you've got this property. And actually, a related problem is the people who do split in the middle of a rental. In term, we'll probably do damage the property there a little bit upset that they're losing their option deposit. Understand me? So they spend all this time getting their what they thought would be their home together, and they're devastated, right? So they're gonna do weird stuff like flush concrete down the pipes and build. It was just weird. Outrageous crap. So you're gonna wanna have at least ah, Margin to be able to do the kind of repairs you're gonna need to get the property upto either sell or rent. In that case, if you use your option deposit, do the renovations. You're probably rented out. That's the third exit. Fix it up. Rented out. You got the money to do that. Plus you got a little extra left over to carry you dream the carrying costs real important that you secure a nice option deposit. So don't be afraid. Toe. Turn down. 10 to Don't have that. So a quick and easy way to get started with this strategy is to, uh, I love could you g make some? Could you d ads? You know, you say, tired of renting want Oh, now we have a solution. That's usually the kind title that I go with. You create an ad. Um, you give a little bit information about how it works. You mentioned that you're gonna need some income here in your deposit and all this kind of stuff, and then away you go. So you want to create. Actually, two things. Number one A system to handle the emails because you will get emails like came and imagine . It's hilarious. I mean, I don't know if anybody, but, Ah, lot of times I get people saying I've got no income. I got 50 kids, I've got no deposit. Can you give me a house for free and maybe give me money? It's like I don't know what they're thinking. I cannot get your property. If you have no income in those games, I don't know what they're doing, what they think this magic is, but I can't do it. So you're getting a lot of those emails. You're gonna people just kicking the tires. You say, Can I have more info? Can I waste your time on? Can you meet me and all this kind of stuff? Don't do that. Do not do that. A majority of the the emails you're going to get are gonna be total duds. There's gonna be one diamond in the rough every once in a while. And as a matter of fact, I was just getting a personal assistant. When you're down the road in your business toe field, all these kinds of things for you cause a headache. Just managing it. Or you could do the email reply system. Um, so the reply system is going to say either. Okay, here's in the information, and you go ahead. So what you're gonna do is create an information package for them. Um, or the email is going to say, OK, do you have, um, an income that you can verify with with your? Anyway, So you're basically a nen come that you can verify that you've paid taxes on, um, do you have some savings or access to savings? Have you been through a bankruptcy? Right? Because if they've been through a bankruptcy, it takes about six years from the point in which they've been discharged, um, to the point in which they were able to get that kind off there, the profile so that they can then go to lenders and qualify for a loan. So you don't really want to get in the space of doing a six year rental in terms you can do between 1 to 51 year to five years, three years of the sweet spot if you can. But six is kind of a long time. So if they just went bankrupt, they're not a candidate. If they've been discharged, it was a couple of years ago. Okay, you can work with that. That's cool. So you want to make sure that they got the letter of discharge from proposal and also, you want to make sure that I got nothing in collections? They're not. They're not outstanding in any kind of major way. You could work around with some stuff, but that those are pretty much the criteria. So that's gonna be your apply system for these kinds of questions. At least have the information package ready on day. Have a ah way of, you know, going back and saying this is what we're gonna need to get from you. Do you have this? And they say Yes. Then you could make calling into We're gonna provide you with all those questions of the right questions to ask the interview. This potential prospective tenant buyer were attached at the end of the resource pile. Getting back to this idea of your net worth is your network. It is really important to, uh, meet with mortgage brokers who understand this strategy. Um, they're going to be the ones who are going to check all the information that they're gonna be gained him from your perspective. Tenant buyers, they're gonna be able to give you the green light so you don't need to particularly know all that stuff will handle that side for you and explain to you as you go if you ask nicely . Um, they also have access to a bunch of tenants perspective tenant buyers who were initially buyers but who can't qualify because they didn't know that until they went to broker. Right. If you could do some deals through a broker, you make them happy. They see that you can do this kind of thing. Then guess what next time they have a situation where I can't get a commission because this poor buyer can't qualify for a loan. No, you can get in the commission because now you're gonna buy it, and you're getting the rent tone it from you as an example in Canada, these were few of the requirements that your broker's gonna ask for. First of all, you're definitely gonna want to get proof the option about it. They're going to tell you they got 10 grand, 20 rand stashed away and mattresses or whatever. That's not proof. You need proof. Yeah, it's right here. My bank account. I can show it to you. So get the proof of option deposit. Um, the mortgage brokers also requests that you get there previous two years and always so they're noticed of assessments. They're gonna request t force. This is proof of the remuneration of taxes. They're also gonna want the t one generals they're gonna want obviously photo I d. Government issued i d S o driver's license. Um, um passport. The social insurance number. Um, they're gonna again. They're gonna tell you what they need. This is just an idea of you know? So I remember, actually. Ah, one kind of a feeling I had when I started doing this is I'm a little scared to ask these people for all this private information. Don't be afraid of that. Because they're desperate again. They're coming to you because they had a problem. They need your expertise to solve it. The mark mortgage broker and needs of this stuff and you need this stuff is part of your due diligence. So don't worry about it. If they don't want to cooperate. Guess what you need to wasting more time with them. Let them go. They could figure out on their own if they don't. You right. Okay. So on the rare occasion, you know, you get the tenant to go through the mortgage application through your broker after you, of course, called them. Then they've gone through your prequalification questionnaire, which we're gonna provide for you. You give him this mortgage application. So on the rare occasion that come back, the mortgage bird comes back. Goes yet So they do have this amount saved. Got 15. 20 grand saved. Uh, they earn $100,000 a year. They got great earnings. Their credit score is this much. They're going to tell you how long it's gonna take for them. Toe be ableto be considered for a loan. Um, hopefully it's three years. They'd be a nice, sweet spot for you. Um, they're gonna verify all this stuff for you so you can go ahead and now contact a realtor again, Preferably a realtor or real estate agent who understands this strategy and who knows what to look for in a property and investment property. They're gonna take thes 10 and buyers out 10 buyers find a property fall in love with you. Make your offer with your down payment. Boom. You've got a property you've got attended. Buyer away you go again. You're going to need a source of financing. You're always gonna be looking for financing on all of your deals. Um, so there's a lot of potential, um, lenders out there for this kind of arrangement, cause there's a lot of different ways that you get paid. So just to review again, your option deposit right up front, you collect monthly rent 10 and buyers gonna take care of utilities. It's all in their name, right? You have to worry about expenses like property Manager, because they're a property manager and they're gonna take a really good They're gonna take really good care of the property because it's gonna be there home someday. Probably improvements to for you for free. So if they default or something happens on the interim, then they've done some improvements for you. Um, you're also gonna get your option credits each month, so you get ah, high cash flow position. You get cash up front. 3rd 3rd way is on the sale. Um, what you're going to do with this is you're gonna agree with the tenant buyer on a future purchase price on. That's gonna be what they're buying the option on. So again, going back to the option for stock. Their option is to purchase this property and exercise their option of purchases. Property at that strike price in three years or five years time or our long taste them toe be able to qualify for the loan. So we'll get into some of that calculation in the next. In the next segment will break down the numbers for you. 17. 16 Where Can You Apply Rent to Own: Uh, all right. So you know how rent own works? Where is it work? Where can you apply this strategy? What kind of market? You got your mutual kind of market. You gonna put it in? Really? You can use rental own virtually in any market. Um, I recommend. I mean, you could do like the hot, the cold, whatever. It's all good. I recommend sticking with hot, because in a hot market, you've got higher appreciation, right? Um, so, actually, the really cool thing is you don't bank for appreciation right when you're doing investing like the buy and hold strategy we talked about earlier. But the cool thing is, if you're in a market where it's super hot, like in Toronto, you can't you can't buy it. Well, guess what if it's super hot, you buy a property, right? Interest. The appreciation rate is so crazy that in three years, instead of assuming, like, let's say, a 4% or 5% appreciation each year, you could do maybe nine or eight or something like that, Right? So you've doubled the rate of return during that, uh, for that sell side of the income stream on this type of a deal by purchasing in a market that's hot other than a market that doesn't really appreciate to I, um of course you want to not get too greedy. You want your tenant buyer to complete this rent to own term and be super happy? Not only because that's what you're agreeing to. Um you're gonna make a difference in life by doing this, but think of it. And selfishly, I mean the most of your, uh, uh, deals, um, your prospects, pretty much a lot of the money to be made again is in your network. So you help these 10 and buyers out there going to refer someone who's gonna want to sign up with you right away, because chances are they're probably associating with people that are in a similar situation to them. That's a whole other market that you can tap into that you don't need to advertise to or waste time with. You'll get a lot more business that way, so make sure you don't get to the point because, you know, again, one caveat. One warning with with this strategy is lending rules change all time in particular here. Ontario lending rules changed recently, it's It's getting a lot tougher to get loans. It could be that rent to own kind of phases out because in this area, because the prices are so enormous that in order to get someone Teoh qualify for this program, they gotta pay so much an option crest to make up for that down payment. They got have a lot of money saved for the option deposit upfront. And it could be that if the rules changed, all these numbers are based on a 10% down for them. They're gonna get a CMHC, your fhe insured alone. And if all of a sudden the rules changed, they go, Oh, well, turns out these properties too expensive. We're just not gonna provide those 10%. Now, you've got this tenant buyer who can't buy the property that you've promised. You work so hard for 35 years, whatever. Here you go. It's great. There's a reward that could double their intoned term because they got to come up with another 10%. And you've got to increase your future sale price now because you already completed the first term. You want to make sure that you I mean not you. You're still gonna make money, right? Use your business. You're gonna make money the next, uh, term. So you increased the term. You've increased their option there. They're down requirement. In a lot of cases, it'll fall apart. They might just give up and lose. All that money is a disaster. It's gonna be tough that you're intoning this mark. Anyway, that's kind of an aside, but that's just a warning to you. Might want to structure your rent own deals, assuming a 20% down, uh, instructor in the term. That way, if you can. If they've got a great income, that would be a lot more secure. I realize that. It's very slight that you're gonna find that azan option. But if it does emerge, keep in mind go for 20% of 10%. Okay, so we've gone through, uh, doing a straight lease option. Ah, Now we're gonna look at the second example. Um, this is a more creative way to do the least option. Actually, it's it's on offshoot. It's the same principal in place, but you've got kind of another feature to its. So here's how this works called. It's called Sandwich lease. It's called a sandwich because this way of structuring the lease option has a lot more moving parts. Right, So with lease option, you're looking for a tenant buyer, right? They go find the property where you go easy. In this case, you're focused on finding a property. First. You're looking for a distress seller. Possibly distress property or both. Uh, they're gonna have to be in a market where they're having a tough time selling, but they're motivated. Teoh, um, get rid of this. This property, right? You swoop in there on what you do is you. You become the less e u ah, have an agreement with this owner. They say, Look, I'm gonna rent this property from you. Eso I can cover your expense to close, But what I'm gonna do is I'm going to get someone else who's gonna come in here and rent and live in it right there in a pay me rent. And they're gonna purchase the property in 3 to 5 years time. Um, so now you've got that first part You found this property that's a little bit distressed. The seller has got to be really motivated to do this with you. Um, you get that part figured out. Now, you look for the the tenant buyer, just like before. Right now you are, the less or you're gonna be providing at least to the tenant buyer in a property that you don't own that you control. Okay, so you don't purchase this property like you would in a straight least first. What you do is you get a lease agreement first. Then you feel that lease agreement with a 10 and buyer who you structure to purchased the property in three years time relieve the original owner of their problem. Tenant buyer gets a property. Uh, you get paid really for nothing. E November. Nothing takes a lot of work to put it together, and they're rare. But you don't have toe, actually, have you not to qualify for a down payment to obtain the property. You don't have any real liability. You can walk away at any time. Uh, and you've got a property in which you're getting paid the option deposit again, right? You get the rent, which is the difference between the rent you're paying. So let's say you pay. You agree? Teoh, pay 70 bucks or whatever. You get the standby here and now they're paying 900. That's a spread for you to keep. You also got the option credit that you're getting paid, cause they're gonna make up the rest the down payment, and then you've got the, uh the margins that you make at the time of sale. So you're gonna have an agreement with the seller, Ah, to purchase the property in three years time at a price that they're gonna be happy with what? You create a separate purchase agreement with the tenant buyer so that you can make money on that cell, so so that the value that you're gonna assess is going to be higher than the value which you offered to purchase the property from the original owner in that three years time. It's very complicated. I know it's very screwy. Took me a while to get my head around this thing, so don't worry about it. Um, this is just the more creative way of doing it. So again, this is an example of maybe what you call a no money down deal. But this one actually is a little bit less risky because, um, all you gotta do is fill a lease agreement. You've got nothing really at stake here. Um, so that's fantastic. No money down, no need to qualify. You get to control an asset that you get paid money on. It's a fantastic strategy. I'll be real honest with you. It's very difficult to put this kind of deal together. Takes a lot of work the rare, um, but it's a more creative way of doing it, and it's a great if you pull it off. It's fantastic returns for you with very little risk, as we just mentioned. So it's difficult to put together because first of all, you've got this seller now What kind of a seller is gonna be in a position where you know they've got this financial issue they need to sell, but they don't need to sell right now, and all you do is make the cost of caring a little bit easier. They're also gonna need to agree to get someone else to live in that property and possibly do repairs so they could do more damage their property, so that could be a perceived risk. Also, this this person, they might have a timeline that's very specific. They need toe cell within a certain timeframe. But now you've got a match that time frame up with your tenant buyer because if it turns out that your they need to close at a certain date and your option expires at that date, If these people cannot qualify for the loan or something happens, they walk away and you gotta get a new tenancy e mean lying those up at the same time really difficult. The risk is your e mean you're pretty much on the hook. They would have to chase you really toe really hurt you. But it's difficult just to set that all up. You get the idea, and any other thing is on the tenant buyer side, you gotta find a tenant buyer who wants to live in a stinky old rental, making that you gotta be pretty desperate. It's going to do this because they also got to do some work to fix it up, not buying their dream home. Remember that they're in a situation where they need to get to a property now, right? So if you confined a desperate enough seller, if you can find a desperate of 10 and buyer. And if you happen to be in the middle of this transaction, when this is occurring and you get sandwiched in the middle of it, that's great. But it's very difficult to do, and it takes a lot of work. There's also the added risk of potentially needing to do repairs in order to get the property tenanted. It could be in such dire straits. So now you gotta put up your own personal money in a property that you don't own. I wouldn't do that. I mean, if you're comfortable with it, okay? And you may have a fantastic tended bar you wanna do with. But there's other ways to make money with less risk, so I would back out of that. But that's potential again, another challenge with this deal. So the fourth strategy is assignments. Assignments are a fantastic way. If you're just starting out in real estate to get up, get a handle on you know, making offer is getting a property tied down under contract. Um, and you don't have to go through with it. So So what it is is you get a property under contract and you assign it You essentially handed off to another party who will purchase close on the property, uh, and reap all the benefits associated with owning that property. Now you're involving. The property ends once that contract has been fulfilled by the buyer. So you're only involvement is you get a property, you get a piece of paper saying I have first dibs on this property, no else to make offices. I got an offer accepted at this rate with these terms that it you sell that piece of paper you sell, you assign it to someone else. Um, that it's pretty straightforward. That's the That's the business model. So again, why is this such a good strategy? Well, um, you don't actually own anything. You don't have anything at stake. Perhaps apart from on option deposit. Um, but you're not. You don't only thing, but again, you control something so you have this piece of paper that you can have someone else to make cash on and again. So because for people were just starting out, this gives them a bit of a practice that drafting up offers and getting them all together, But also a lot of people will save. For instance, the reason they don't get started. Real estate investing you. The two main reasons are I ain't got no cash. I ain't got no knowledge. Well, this program is gonna give you the knowledge we've gone through. Uh, we're almost there at the tail end of it. Now, um, the cash could be made up by getting these properties under contract and then selling them so you can you can leverage what little cash that you may have. Teoh go into the deposits which will be paid back to you and your option Feel bay to you. You can maximize your return on that cash without getting into the sticky business of liability ownership in that kind of stuff. So it's a great way to produce cash and get some experience in any and all of your agreements of purchase and sale on your offers that you're presenting, you're always gonna put, um, your name or, you know, if you like your business or what have you and your always include and or assigns, Uh, what that does is it says the person who's buying it might be this person or someone else, right? So that kind of gets you off the hook a little bit. Ah, and it helps you kind of exit the contract without really offending anybody. Because you're saying, Well, I was gonna potentially a sign it if it didn't work out for me. But, you know, it didn't work out. So they and or assigns a little bit and exit there. But most importantly, what it does is if you decide to get incorporated, you have that there so that you can insert the corporation, replace your name with it. And now the corporation is gonna go on the purchase agreement and gonna go on title. Um, that's what at least you're gonna need to know that because when you're putting out these offers and agency the and or assigns some of them are a little bit and like it, because there's a lot of people use real estate to getting all kinds of fraud and and getting bad ways. So Simon's sometimes is a bit of stickiness With that, um and and bad news, bad press coverage. You're just gonna tell him? Look, I always put the end or signs in their number one. I'm gonna be a plan on purchasing this property under corporate name something You switch myself out. And number two if for some unforced, evil reason my partners back at the last second, I can't secure financing. I wanna have a way that I can close this deal with one other investor and my group doesn't want a partner with me on it. I just want to be a payoff inside Murphy and keeping themselves. So that's kind of gonna be your way to explain around using that. Your fee for putting this deal together is ultimately up to you. Um, there's all kinds of fee ranges. Um, when you kind of get a bit more practice and investing, you see the values forgetting certain types of deals. You'll have a better idea. What is that you should be charging? Um, in any case, investors will probably want to negotiate with you because they negotiate everything. You just got to remind them of the value that you're bringing to the deal. So make sure that you're giving them a deal. I mean, you know, you don't need to necessarily have the ultimate deal of all time because there's different investors with different strategies, different rates of return that they desire would have you. Um I just wanna make sure that you have something that you could argue is a deal. Don't just get a property under contract, then go talk to investors about it. You're gonna create a bad name for yourself. You don't do that. Another great way to make money on assignments is, um rather than selling the contract to another investor you sell to an end user. Why would you do that? Because again, remember the value right there. Insane price and value the value to an investor is an income stream there. More than likely going to buy the property to. Well, not more lately. There's all kind of science. Let's assume they want to buy a property flip. They're gonna have the margins that they need to worry about. They're not gonna pay too much of an assignment fee. If they got I put up all this other cash, they're gonna have a way to come at you with that. Maybe don't want to deal with that. Okay? So if you're in a hot market, what do you do? You put you put out what's called yellow letters. These air basically, um, often you could do hand written, or you can find a sort of a handwritten font prenup. These letters dropping off in mailboxes with your card saying, Hey, I'm an investor in the area. I'm looking to purchase properties. If you have to be interested in selling, you know, here's my number. Thank you for your time. Always kind so you could make whatever letter you want. But the idea is you're looking for the rare owner in a hot market that has a toll garbage proper, like a total to just disaster. Um, you want to find these people who don't want to go through listing because they got clean up the property or they don't want to clean up property, But they don't deal with people coming into it or whatever the case may be. Get that under contract. Go find yourself some real estate agents. Let them know you've got a property off market. They're gonna They're gonna be all over you because they know that they can get their, uh, they can make an agreement with their clients. They look, you could just pay me for this or whatever agreement I want to make to get their their client into a property without having to deal with a bidding war. Now there's a whole lot of value, isn't there? They avoid dealing with headaches of bidding wars and stress of going through all the negotiation, that kind of stuff to say. Look, here's here's a property already done under contract. This amount you get in there Onda live a great life. So you're gonna get a nice margin there because the end user is not as particular about what they're putting into a proper because they're not buying it for rear turn their buying it for use. They want to live there and enjoy it. So what, you could have sold to a new investor for maybe 5 10 grand. You can sell to an end user for potentially 45 50 grand if you got that kind of a difference. If you got the market is super hot. The seller just wants to get rid of it. They want to deal with this headache. Uh, and you've got an unlisted property, and they're and they're okay with doing a bit of work. Hey, that's a That's a way bigger spread for you because you got the right kind of buyer, and actually, that's kind of Ah, good lesson. Overall, there's always the right buyer out there somewhere. Um, obviously you want a market your your deals when you're selling them to as many people as possible, and you don't have the kind of deals that will sell it to as many people as possible. But there's always gonna be the right kind of buyers, so you can create your niche with wholesaling by targeting and users and getting these kinds of properties tied up. One important word of caution. You put an offer in on a property, right, you're on there and or signs. The other component of is that you gonna have to put in earnest money deposit. Um, and now you sign this deal too. Another investor or whatever. Another buyer. If you can't close, you lose this earnest money deposit in addition to the fact that they have the option to now come after you and see you. So it's kind of a precarious position to be in. Um, just just a word of word of warning that it's not all glamorous. A lot of time these programs take away, I go that go out and do assignments all day long. It's amazing. Wonderful. Just make sure that you talk to a lawyer and figure out an exit strategy that's gonna work for you in the event that you're fired because not close. Seek legal advice on this or Dr Investor who doesn't makes a business out of it and see what they say. 18. 17 Get More Money with Tenant Buyer Assignment: another really cool kind of assignment that you can do is instead of getting a property under contract and sign that to investor, you can do the rent to own route, get a tenant buyer. Before we talked about how rare they are, right. Get a tenant buyer. You find a tenant buyer, you go through the mortgage application, their gold. You've got the proof deposit, all that good stuff. You've got a product now, Um, I mean, it's human being, but if you get them to sign an exclusivity agreement with you right, that they're not gonna work with any other investors. You've got this person now under contractual obligation. You secure them and you can take their profile over to other investors and say, Look, I was going to be Oh, this lease option turns out right now is never a good time for me. So I'm looking to sell this tenant buyer, and they're excellent for all these reasons. You sell attendant fire. So in this case, you get a property under contract. Now, this is a way to mitigate the risk involved with getting on actual property under contract . If the buyer doesn't close, you got all these headaches to worry about. Now, this case is just a person. It turns out that investors, you're going to find an investor. You're gonna want them for sure. Absolutely. If you don't Worst case scenarios ago. Sorry I'm not good at this investment thing. I you know, goodbye. Whatever. You get them angry, but it happens. People gonna anger between this business. You talk to enough people are gonna set somebody. Actually, that's part of the process of learning. Try your best, not toe hurt anybody along the way. But it could happen in this exclusivity agreement with the tenant buyer. When you're assigning them, you're gonna wanna have some things included in there. So number one is the right to share their information that you've collected with 1/3 party investor. Uh, and also, um, that you will Onley select an investor at your sole and absolute discretion. We'll give you the contract to set this up, but you're still in absolute discretion. So you get to choose this gives you a role. Now you get to choose the investor that you feel will secure a property and go through the rent own term and help this tenant buyer succeed, and you also relieve yourself of any liability of releasing the information to 1/3 party source. So get the 10 empire to agree to release the information, get a tyrant buyer to agree that your responsibility is to fire another investor and have them take care of this person. Um, you get that written in the contract and you let them know that it protects them from you, just giving them away to any investor. And you don't care if they close or not. You don't really explicitly give that guarantee because anything could happen. But it gives them that gives you that kind of role. Alright, lets them you can explain it to them more or less in those terms, Um, you definitely want to get this contract because this can be a business where people take advantage of you. If you don't get the exclusivity you could end up with. Another investor says, Oh, yeah, let me let me call them and talk to them. And away they go. They don't even need you anymore, um, as really a point you're gonna wanna have in that exclusivity agreement or start with the with the assignment agreement with the new investor that you you release the exclusivity once they have closed on the property or whatever time you feel is appropriate. Soon as you've got, that typically will be a closing because the option deposit is gonna be your source of your option, your Simon fee. So they typically will not pay that out until they close on a property. A lot of things can happen. And if they agreed to pay you a fee before they secure the option deposit to pay it with a lot, a lot of crazy things could happen there. So they're not gonna be doing that anytime soon. Probably some ways to get more money with the tenant buyer assignment is to do a You go through the lease option the beginning part, right. So you get your tenant fire and now you get a property, right? You tie that under contract. Now you've got these two, which you can turn around in sultan investors. So you've got more value here because you've already got. First of all, the investor is going to know how to calculate the return because you have a specific property tied down. You have everything that they need to know to figure out. Do those calculations. There's more value. They get security there. The other thing is that you saved everybody time. I don't have to involve any work, no delays, whatever. It's all done. It's all tied up. There is a date that they can rely on. There's a there's a calculation that rely on there's a lot of value, their on again. Of course, if you're going to do the the lease option assignment with the tenant buyer bundle, you could also do the sandwich lease. I don't know why you would if you went through all that work to get the sandwich leads together, and it's working. I mean, you don't have any liability. You're getting all this money. I wouldn't give that up. But let's suppose whatever. For whatever reason, you gotta leave the country or whatever it is. You can create this assignment condition for a sandwich lease option. When everything is in play, that's tremendous value. Could probably charge ah lot for that. Depending on where you find the right buyer, you could you could make some quick cash doing that and flee the country and do something else assignments are a ton of work. It's not like you get a property under contract to sell. It takes two seconds. You got to do a lot of advertising mailing. You've gotta feel different kinds of properties to find ones that you can actually, you gotta negotiate. There's so much work involved. Assignments. If you can find a way to charge a lot for him, it could be worthwhile. But just remember, if you worked so hard to get a deal together, you don't get the benefit of the long term stuff, which I guess makes sense. If you're just starting out, you're looking to raise some capital, but it is a lot of work. I'm not gonna tell you that it's easy, so be prepared for that. Like everything else in life, if it's worth it, you're going to put the work in to make it happen. It is an option for you, but anyway, that's that's the That's the assignment strategy. A lot of investors use even pro investors to make terrific quick returns without all tying up the time their money or expose themselves any liabilities or any other problem solving situations just in and out quick cash. Great option for you if you're especially just starting out throughout this lesson plan, I've been emphasizing using OPM other people's money using leverage. I haven't really talked about the benefits of being OPM and giving other people leverage. It's a lot of money to be made. And this is the, uh, fifth and file strategy that we're covering in this lesson. It's the, um, hard money side. So hard money lenders include private investors. They could also be cos what they do is they are, Well, they're more or less. The last resort for an investor on it could be different kinds of deals. Typically, it'll be flips. It could be a longer term. Contracts could be a couple of years, but what it is is they provide usually second position financing. So first position is going to be the bank, Uh, which means they're gonna be the ones who get paid out first in the event of the sale ornament of a default or whatever scenario their first position. Because these letters are taking the second position a little bit more risk for them. It's also shorter term typically so if they have that risk, If It's a short term not worth their time. Uh, and also, if the investor putting deals together can't get a loan any other way like no one else wants to touch it. It's a lot of value to investors. So typically, when you're hard money lender, you're gonna charge rates between eight Teoh it could be 8 to 20%. There's also fees associated with this. So you're gonna charge maybe 12% of a fee just for kind of looking at the deal more or less . I mean, you're gonna get paid for that when, when? Obviously, they accept you as a source of financing. Um, and they're also going to feed for the broker because typically, as a hard money lender, you're gonna have brokers out there working for you, looking for investors who need cash. Um, so this strategy isn't really appropriate for you as a beginner. I pointed out to you because, uh, well, two reasons. So, first of all, it's the end game for a lot of investors. At some point, your career, you're not gonna be so excited to deal with problems anymore and figure things out and get stuff under contract and all this jazz, so you're probably gonna look for a way to secure higher rates of return without having to do with all those headaches is the perfect opportunity for most investors on the later stage of the game. The other reason I mention, is because I kind of want to get into a little bit of source of funding for your deals. So if you are getting into ah, flip scenario we mentioned before you could use private money, this is really what it's all about. So there are. There are lenders out there who loaned specifically on flips. They're totally cool. Some lenders are so specialized in the domain of fixing flips that they're actually willing to lend on the after repair value of a property right now rather than what the state of the property currently is. So they get some comparables, they find out. Okay, well, this is the after a pair of value we can get right, they'll lend to you on that, so that increases your borrowing capacity. That much more terrific option for someone is flipping. It doesn't when he's too much of their own cash courses, lots of fees involved and like we just mentioned and the high interest rates. So you will be careful that you don't get into situation that you can't get relatively quickly. This will be, ah, probably the time to use those investors or those lenders. Is that the point in which you've done a few of those deals that you're comfortable enough you've established? You know what you're gonna make on a deal? You know how long you're gonna be in there, what it's gonna take to get out. And you will be able to cover yourself after six months if it goes longer, The other option, apart from the hard money. And by the way, I mean it is called hard money because they are providing alone on a hard asset, right? So they consider the asset, rather than considering your credit and your income and all that kind of stuff didn't really care about that. They are former investors or they're still investors. They understand how real estate works. They're cool with the security they get in the property. Banks are not so cool with that. As a matter of fact, when banks lend to you on their accounting ledger, the property is a liability. You're the asset because you pay them interest, but they don't want to be paid in dirt, right? They want your skin in the game. They want that kind of security along kind stuff. They don't understand real estate, their businesses, trading and money getting interest rates. That's it. With the private moneylenders. They got a little more experience. They know that their security in the deal if they structure properly, um, so they look at the hard asset, not at your sort of soft credentials. The private route is another option for you. Hard money is going to be typically very expensive. Private money is going to come, and those people are professionals and investors. You probably never even meet private money is different. That's these people come from your inner circle of influence. So it could be your parents, grand parents, aunts, uncles, anyone in your family, right? Could be friends, could be associates. It could be people that you meet along the way. And, you know, they develop a relationship with you. They trust you. Whatever. These types of people are a great source of financing because they will not charge you those outrages. Interest rates cause for them. But just the average Joes, they they're happy with 3% right? They probably won't even charge you fees. Aside from, of course, the cost to set the legal stuff and on you paid legal fees. Couple around here, there, that's no big deal. They also won't try to ding you if you go later on the projects instead of four months goes to six. They probably won't ask for additional fees for extending the project. What you'll get with the hard money guys so vanished for you. Starting out is to first tap that resource of private money, talk to anybody and everybody, letting them with what you're doing, Uh, and that when you got a deal, you're gonna consider them as an option to get in on and make some cash. That's what you want, a structure that, um, just kind of going back to it. Though we're talking about this private money lending has a strategy for you. Inevitably, I want to talk a little bit about some of the pros and cons. So as a strategy, let's consider the upside potential on the downside potential. Upside as we alluded to a little bit earlier was the idea that, Okay, you don't have to do with headaches anymore. You just put some money on a property. It's making money. You know where it is. You don't really care. You used to totally removed from it. In every person who's borrowing from you, it's all good. Easy, right? That's one big advantage. Uh, because a lot of work set up these deals. You're gonna find out when you go out there and start doing the other advantage is security . So kind of? The nice thing is, you put the money into the deal right, but you never exceed that 80 to 90% loan to value ratio is the same reason the banks won't , um, there's no security in it they want, and you will want some skin in the game for the person who's going to borrowing from you want them to be in a position toe really lose, because that's gonna motivate them to find a way to keep making payments to you or to find a way to sell the deal and pay off all their debts. Otherwise, they risk having serious credit issues that could follow them for years to come. seven years or more. Um, so that's that's kind of the upside. For years now, you've got this deal, right? You've got their skin in the game, which also means if they default Ah, you get a discount of property now because they've put in the 10% you have the first right to come in and take care of the property cause obviously bank doesn't want to do it. Even though you're in second position, you do have the first right to purchase before they take over and do their power sale or whatever it is they want to do. You get the first right to purchase property. Now you've got this kind of property. You don't have to do any work to find it. You've already done the due diligence to accept the loan so that work is done. You just get a property, which you can turn around, rent or sell rent own whatever other exit strategy won't apply to. That's that's kind of benefit number two. Finally, the third benefit to this strategy is you got options. There is no end to investors out there who are looking for funding for the deals. Everybody's doing it everyone's looking for financing. So you got a lot of deals, in other words that are flooding into you all the time. So again, this is the minimal time component, right? You've got people there. They're fighting to get your money and they want to, um, you know, give you favorable terms. They want toe, get the deal done, and they're desperately need you. So you've got option this point balls in your court. Let's consider the downsides was always downsides. Downside number one, which may not be really too much of downside, is to me you're not getting in the highest and best use of your capital. When you get into a deal, you get all kinds of benefits the four ways of making money. You structure the deal on your terms, you get whatever kind of rate of return you want to do and use a little a little of your own money as possible and borrow analysis. This is fantastic for you as the lender. Uh, you're not getting the highest and best use, but, um, that might not be concerned for you If you don't care anymore. You're at the stadium. Look, I just don't want to think about anymore. Okay, That's not a problem. That's great. Actually, there is a problem. So this is downside number two. Uh, you don't deal with headaches anymore, right? So the downside number two is that it can be annoying. Now, if there's a default now, you've got a problem to solve. So even though you don't really have the time commitment, you might have a time commitment. You gotta deal with this property. Now find a secure way to get your cash out or to get a tented or whatever you got a problem to solve now. So that can be quite annoying. The 3rd 1 A downside, would be that you're obviously again kind of really at the highest misuse. You're tying up your resources. I mean, you gotta put out hundreds of thousands of dollars in most cases toe loan out on these different deals. Those of your resources there tied up. What happens that tomorrow another borrower goes, Oh, I'll give you 40%. Not that ministate, 18%. And you loaned out of 14. You're losing out now on this potential, right? So again, if you're in a position where you don't really carry is gonna make 14% or go with that. Maybe not. A downside to me is the down side. You know, I'd rather get the work done or the systems in place toe, make it more streamlined and get a higher rate of return, not tie up my own capital. Have options. 19. 18 RRSPs: uh so one really important point is not a lot of people have savings kicking around, uh, to the degree that you're gonna need to do some deals, what they will have. However a lot of Keynes do. This is something called, uh they got their money tied up in something called the RSP. This is the registered retirement savings plan, or they're gonna have their money locked into mutual funds or G ay sees, or these other, you know, sort of bank advertised investment strategies. I don't really want to dig too hard at people that are just doing their job, Bond, you know, because a lot of times I don't know what they're doing, they think they're doing something good for the clients. The R S P is a major scam. There's a great book called RSP Secret or the Artist. Be secret. Get that book. If you plan on using other people's money, private money on your deals, because what it does is it outlines pretty much the whole scope of what's going on. So when you have an RSP, you put this money in, uh, you have no guarantee of a return, and you also have no control over that return because you give it up to an expert, right? This expert is the, you know, the broker putting the deal together they get and the apparently manager funds or whatever , but they get paid a front end fee. Sometimes they also get paid a back in fee or they get one of the other or any kind of fee in between. When you purchase the property of the the or S P and you, you sell it. So within our SP, you've got your cash that you've been putting in over the years and saving up so that when it comes time for you to retire, you you sell that you take out all your cash you saved up so diligently so you can live off a retirement. But what happens when you suddenly get a bunch of cash out of thin air? You think the government's gonna say you go ahead and keep all that Or, you know, I want some Yeah, that I want some parts. So the government's gonna come in and tax these RSP people, um, who are just trying to get the cash that they can retire after slaving away all their lives , working hard for someone else, making them bridge. They have the audacity come in here and tap into that retirement savings plan. So what you want to do is you want to step in and prevent that from happening. You can get RSP money into real estate deals. There's a specific company called Olympia Trust. They specialize in doing this. You need their expertise to handle this. You need to trust. It's a whole complicated legal thing that the short of story is that a person is going to invest. There are speed into a real estate transaction taken on Lee. Invest in what's called arm's length transactions they can't invest. So, for instance, if you've got a mother grandmother that got ours peas, they're like, I don't want to pay taxes and I'm not getting enough. You go. OK, let's do this deal together. You can't do that. You're too closely related. You're not at arm's length. There's a whole explanation that in the RSP book, basically, they can't do it. So you need Teoh get a property, uh, that you joint venture with some one on and they go on title or they got their corporation on title Whatever. Now it's an arms like transaction does not directly tied to you. You're a joint venture partner. You're more or less removed from the actual cause. Whatever it is that you're involved in on the joint venture agreement is separate from the agreement of the purchase of the property. So you're not going on title and you're not going on the purchase agreement. You've got nothing to do with the property from that regard. So you get this arms like transaction. Now you've helped people that are getting scanned by the government to move that proper, that money into property get much better return. And in fact, when it comes time they want to pull it all out, they're gonna pay taxes again. Still can't avoid that. Now they can do enough deals with you to provide the cost of what that tax and cost them so you can get some more or less all the savings that they've put in overtime tax free, more or less. Um, the other route is to use just everyday folk who are tired of getting a little rates of returns on their mutual funds. G. I sees. This is also a kind of another inadvertent scam by banking. Let's let's call them what they called investment advisors or whatever they're called. These air brokers who sell the mutual funds manage them. They collect fees for selling the funds to these buyers. They get fees for the buyers selling their positions. And on top of all that, they get taxed of any rings they get in addition of the fact that they have no security, right? So they have no guarantee, First of all, that the bank is gonna perform. In a certain rate, they say, Well, this is the 30 year average, 11% could be 2%. I don't know. They're not gonna promise anything. They're not gonna be tied to it. So you've got you've got no guarantee you've got no security and that you've got no control , right? Uh, you're basically these people are handing off their money so that they can just get tax and pay the bank. It makes zero sense, especially when you got let's just say they put it into a property right guarantee four or 5% increase over 30 years. That's on the low end. In addition, the fact they're paying down the property that they control. There's so much more security, so many more options for profit. It just makes way more sense than getting into mutual funds, in my opinion. But anyway, you can help these people get into some real estate action as well. Um, just tell him that they're done with the bank and start doing business with you, and you can get their extra cash floating aside, working a lot harder for them. 20. 19 The Plan: uh, So you've got an understanding of what an investor truly is you've got, Ah, the the kind of indicators you need to look for when you're trying to choose a market to invest in, You know, the kind of properties wanna look for. You've got the strategies in place. You've got the examples in place. You've got the formulas, you got the quick calculators. You've got all kinds of craziness. All right? I don't want you to run out there without a plan. Remember, PDC a plan is the first part, so I'm gonna give you a little bit of a plan. Um, maybe it doesn't work for it. Everybody's different. You don't need to follow this. It's not sacred. But here's kind of a plan that makes the most sense. This is gonna be getting probably the optimal route for most people. The plan has six parts. So just beginning with number one, the first thing you should do, a lot of people go. What's the first thing I should do? The the first. OK, you first of all need to set up foundation's just just like you set up your properties toe over time, bringing great returns you want to set up your foundations with people you want to build relationships takes a long time to build meaningful, trusting relationships based on integrity based on character. Takes a long time to find the right people. At times, we'll find people that you well, fire, not work with anymore. You got sift through a lot, so you got to get out there and network like I met. I thought it was important, right? But I never really did too much until I realized that the example I explained earlier about my next door neighbor, George. There's so much leverage in the networking process, you might be in a space where I usually don't really like doing. It was like, You know, you show up these things, you see someone and you're like, How is the food run here? It's stupid, right? But get over that feeling, Suck it up, go out and do something don't want to do because it's for your future. For your family. Go meet these people. Build meaningful relationships. Number one lawyers, right? Absolutely want to get a good relationship. Accountants, uh, they want to give you some tax advice on how to structure your deals or what to be aware of when you're getting into deals. You want to build great relationship with Realtors. Mortgage brokers. You want to get all these foundations in place, But the most important thing the first part of your plan This is where you get start is meeting other people that are doing right now what it is that you want to do with your investment career. They're living the kind of lifestyle that you want to live. Ah, lot of people are gonna try and discourage you and talk down to you because you got dreams . Most people don't be reminded of the fact that there are, You know, they they have dreams that they can go and get them. If they work hard enough, they don't hear that they're gonna discourage. You need to surround yourself with people that are going to be not only a source of encouragement and strength, but forget I even if you don't get that. The real value is tying yourself to someone who's doing it. You're gonna learn from them. So what you do when you start up is network Go find out some investors Go on. Uh, Google you know, investment. You know, things near near where Go to them. Go to everyone this month. Go to 45 10. Whatever. Maybe even if it is just one. Doesn't matter. Go out there, meet some people. Find out what it is that they're doing. Find out what it is that they need. What you want to do is if you find the kind of person who you think is where you want to be and you feel like otherwise, they know some stuff. I want to work with them. You gotta bring value to them. They're gonna want to help you. Absolutely. They know what it's like to be in your position. They were there once. They got helped up by a mentor to That's the natural path. You got to start with a mentor. They're gonna help you. They're going to show you how to do it properly. You're never gonna get the kind of value the education, uh, that you're gonna get when you're just near someone and you're learning through what? Tie Lopez. I remember he had a great description. He calls it osmosis. Right. So just by being around these people, it comes out you just absorb it. You just get this ability, this experiences belief you really build a belief which is so important. Um, most of all, you could end a partner with them someday, So they've got all the systems in place. They got all the people in place. They got all the money, whatever and years along for the ride. You make a little money and you learn with him. But really, you have to start are bringing them value. So how do you bring value? This is the first thing you do. You find this investor and you become what's called a bird dog. There's lots of cartoons, you know. They hunt, they sniff in the point straight. You know, it's over there or, you know, they shoot the duck or whatever when they run out and grab and say, Hey, I got the duck. You want to be this bird dog, right? You're gonna go out looking for deals that you're gonna get under contract and you're gonna take it back to investors. But look what I got. Is this fantastic? You can have you worked for them for free. Maybe you can get a little bit probably insist on paying the fee. If you bring him a nice deal, they may even offer a partnership option. If you've got some cash. Definitely will do that. Um, go be a bird dog. That's gonna be the number one step. Go find Investor. You trust you want to work with, learn from become a bird dog. Bring them value in exchange for their, uh, tremendously valuable time and learn. Just learn from them. You're gonna get so much further than just by reading books and going toe seminars. They're great to certainly have their place, but you won't learn like you will if you're with them surrounded by them. Okay, so you're with this investor, right? They're giving you some experience. They're giving you the inside scoop on how they do stuff, and you learn from the best source possible. Right? Here's the second step. The second part of the plan. Now you get paid, you've been helping them out. You've been bird dog, and you're sweating, right? Sometimes gone by. You build trust. Now you got to make some way. Okay? I'm not saying you go ask them for money. I'm saying you get deals under contract for assignment I mentioned earlier is agree. We get started assignment, strategy. You get those assignments, you get as much cash as you can. Enough so that you can buy your first property. Don't be discouraged if you don't exactly get the kind of fees you want. Or if you can't find enough deals, or if the money that you raise not enough to invest in your area is long as you've got that link to your that's the lifeline to this investor. They'll be able to advise you they'll be able to take you every step of the way. Okay, Build that relationship so important. Use the assignments to build your capital. Now you got the capital. You go when you get your first deal. Uh, so this kind of segways now into the second part of the plan, get some fixing flips? Um, the old saying rings true. Cash is king. I've taught yet I have encouraged Teoh use OPM certainly want to do that. But you do not know the pain of losing money like you will when you lose someone else's money. It is so much worse. Toe. Have someone trusting you. You let them down because you lack experience. You don't know what you're doing. You screw it up. That will haunt you. It's not. The money will be made back. It's not big deal. Just the fact that you did that to someone that will follow you. You don't want to do that. Get some experience, get some flips, raised the cash and going to step three. Right. Step three, you're gonna play, buy and hold. Okay, buy and hold is only gonna work in certain kinds of markets. As we mentioned before, you're probably gonna have to look it. Certainly, if you're in Canada, you might have toe away from where you currently reside. Unless you reside in one of those Thunder Bay, Ontario, Or what have you where you can actually do something? Get into properties fairly inexpensively. Get good returns. Um, get into the buy and hold. This will teach you, you know, again how to structure a business. How did negotiate all of the stuff that you got to negotiate To get things set up on, you'll collect passive income which will prevent you from needing to go out and keep doing his flips. Now you're moving, Teoh. Robert Kiyosaki would describe it is another part of the cash flow quadrant. You're getting out of that self employed area during the transition into the bigger business side and collect the passive income. Step number five Revisiting step number one a little bit. Get into your networking deal. You have probably meant a lot of people at this point in your career find other investors. Show him your track record of success. I did these assignments. I did thes flips. I did These buying holds. Now you're in a position to borrow money like a mad person madwoman, madman. Whatever you like, you can borrow money because you have a track record. You also probably met a lot of these people before they've seen you on. You're also gonna have the experience with the investor who can mac you now that it's like no one that people will follow themselves to give you money. That's a great way to set yourself up because you've got the experience in place. You got the ability to attract many different favorable types of lenders because of your track record. This is a great position to be in. Finally, Number six is just freedom that Z six step plan. You want to get in a position where you can borrow as much money to do as many deals you want and eventually become the heart of my letter if you so choose. But at that point in the game, you're free. You've got enough ties. You got enough capital going, a passive income. You're all set up. You don't necessarily have to follow this path. Just a suggestion. But it is a rather natural one. I would certainly recommend that if you do nothing else, do step number one. If you didn't learn anything on this program, if you didn't even bother looking at spreadsheets in the math and all kind of stuff informed us that if you just met one person who can show you the ropes because you're bringing value to them by being a bird dog or whatever the case is something you have to do that you could meet Realtors. I, one of my mentors I met because someone sent me a realtor I met who I didn't work with, sent me a deal, saying I have an off market property, so I message this guy say, Hey, I got this deal I got some cash. Do you want a partner? And he showed me the The business that he use and had a structure the way easier is a nice saying that, um, mentors collapsed. Timeframes they they bring down, just like when you leverage money. When you leverage other people's experience, it does. It raises the bar. Few astronomically, it's it'll turn around your whole business overnight, almost instantaneously. It's create. I can't emphasize enough. I really, really hope that you take that part seriously. If you take anything seriously, go out and meet this person or people. 21. 20 Lease Option Spreadsheet: Okay, so take a look at, um, lease options strategy, otherwise known as rent to own. This is a great strategy if you're starting out because again you get paid and three separate ways. So this is the spreadsheet. I've already got this filled out. We're just gonna do this one based on these arbitrary numbers here. So you get paid through your ways. You get your upfront option deposit, and this is nonrefundable to the tenant buyer. You get your monthly option credits. Those two combined over the term of the rent tone term are gonna equal the 10% down payment on the future purchase price that you agree to with the tenant Byron. And you also have your whatever income you congenital rate from your monthly rent. Typically, you're not going to exceed it by much more than 50 or 100 bucks. That's gonna be the income from the rent because it's an expensive procedure for the tenant buyer. They've got to come up with a lot of money to get that monthly option credit together. So chances are you're either going to just sort of offset your cost with the rent or make between 5100 bucks at most. But don't limit yourself there. Every situation is different. Every tenant by a is different, every markets different. You can do your own sort of research and talk to other investors that are doing it there and see what they're getting. That's really the best way to do it. I mean, me doing this spreadsheet is gonna be helpful for you. But if you go and talk to an investor and see what to do in your particular market, they'll be able to be a better guy than I could be. Just by doing these arbitrary numbers here anyway, getting right into it, we're gonna look at the different ways the different rates of return you can get with the different down percentages. So if you're doing anything less than 20% down, you're gonna have your insurance. So either through the FAA J or through CBC in Canada, you're gonna have those insurance premiums to cover. The best rate of return is going to be I mean, it's gonna be obviously the 20% because you don't pay those extra costs and fees, but everybody has 20%. So if you don't have the 20% to do this the other way do it's obviously is to partner with someone who does or get a private loan, which we've already discussed in the last couple of examples. So moving right along in this deal, we're gonna assume that the market value for this particular property is gonna be 330,000. We're assuming we get a little bit of a break on the price. Just five grand. We get a 3 25 So at 5% assuming interest rate of 2.45% which is about the current rate for people to be able to qualify for this, that is the investor is how it looks. So, first of all, you got your liability payment. In the case of a 5% down with your mortgage insurance, premium works out to about 14. 29 54. You've also got your taxes insurance. Now your taxes insurance. You can always try to get the tenant buyer to cover this. Usually that's not gonna happen, because already they've got so much cost about with the option credit each month. But in this example, we're just gonna assume that we're covering the insurance and taxes. That's usually it's done anyway. I'm just saying you do have the option to do it the other way if you like, so you could see here with 10% less of a premium. You have a slightly lower monthly rate and similarly with 15% and 20% although your taxes insurance against a same. By the way. One thing that's important to note is in this case, we did. So there's P I T I. Your ah principle on your interest payments that to do with the mortgage. Then you've got your taxes and your insurance that you've gotta pay. So sometimes the bank will offer to roll those monthly payments altogether. And in the p i t. I. This is also gonna occur, obviously a fee from the bank, in addition to covering those two because they're providing a service. I don't know what what the services. It's easy for you to pay taxes insurance separately, so I'm not sure why that's worth it. I don't do it, but it is an option to make sure you clear that up. The banks, they might assume that you're structuring your deal with P. I t. I rolled in on the monthly payments, but anyway, here here it is broken down in the spreadsheet separately. So your monthly payments with these different costs add it up or laid out here. We're assuming that the market rent for the area is about 1700. So we're just gonna plug in 1700 here. You could potentially get higher with Lieutenant buyer trying not to go too much lower because you're going to be in the red unnecessarily. And you don't need to take a loss unless you're just desperate to do tail. I don't know. It's up to you. I wouldn't do it. But anyway, let's just assume we're going with the market rent. 1700 bucks here were down $100 a month because the P I t I payments are going to be 1800. You lose 100 bucks in this case using 10 bucks here, you're upset. Me too. So it looks like putting 50% down on this particular deal is going. Teoh, you cash flow each month of 70 bucks. I say its cash flow here because remember, the tenant buyer is responsible for all the other expenses. So your income minus your P I t I mortgage payments. That's your cash flow right there. Okay, that's just for the rent. And finally, with 20% down, this is what it looks like. You got 170 bucks a month, you get almost 100 bucks extra month. So it might make more sense for you to partner on a deal and split that with the person bringing in the money, bringing less of your own cash. You get a much higher rate of return that way, and you make someone else happy. So here, this is the the interesting part. So what this means right here is we're assuming that the market value. So we know the market values 3 30 We're assuming that in three years time, assuming that you do you work out a three year term with your particular tenant buyer of three year term works for them. Your mortgage broker says that's good. You're looking at 5% appreciation per annum and that's compound. So in the first year, it's gonna be something like 3 43 something like that. 3 45 2nd year. It's gonna be the 5% on that 3 45 which gives you 3 63 and then 1/3 year 3 78 which is the purchase price that you're going to agree with on with the tenant fire. It's the buyout price. The strike price in after that three year term. 3 78 through semi. It just so happens to be your buying it 3 25 So here is your gross, and this is calculated by the spreadsheet your gross income just from the So remember, you get paid the three different ways. This is your gross return on the sale of the property and the difference over the three year term. That's a one way you get paid, but you only realised after three years the other way here is so I I just threw in this number here for the monthly option credits to remember that the assuming that you're going to structure your deals and I recommend structuring deals with 10% down 10% of 3 78 378 is roughly 8 37,040 I'm so divided by 36 months or three years that gives you 1052 month. That's the option credit in addition to the rent. Keep in mind again, your tenant buyers also been covering their expenses. So they're looking at close to about three grand a little over three grand a month. So that's why they have to have that healthy income. And you got to make sure that they can cover those costs. Because if it gets too tight, I mean, you're not gonna make sure your broker's gonna make sure for you. That's why it's important work with a good broker. Some brokers just want to get a deal done, and they don't care if this amount will actually exceed their monthly affordability. Your tenant buyer can purchase the property. Now you've I mean, it's not a problem for you because you've got an asset. You've got your exit again really important. Why you should get your upfront option deposit. You got your exit there, but now the broker has more, less screwed the tenant buyer. Now you've got a bad reputation. You don't get really referrals that you would have gotten If you close the deal with the tenant buyer. Not a good way to go. Make sure you get a broker with integrity, someone who understands the rent to own process. Hopefully, they've done a few rental deals of their own, if not for a bunch of other investors. So these are the This is the total calculation on your different points of profit. So by the end of your three years, your monthly credits will add up to about the 10% down required. So that's your you could consider your advanced down payment so you're getting this per month. You're collecting this each month, and it's great when it comes time for the part for the purchase. For the tenant buyer, you don't collect down pain because there's already paid in advance, so you can consider that, basically, just cash flow. Eso that again? Is that the power of this particular strategy? You get a ton of cash flow, although you're going to sell your asset, which is a huge downside because real estate investing is a long term game. But if you just want to collect some cash flow right now and get out of your job right away , there's great strategy. Your cash flow per month is again. You're just what you collect off of your rent minus you expect your cost of borrowing. So you see that in year two? Let's see. So over two years, so in your to your, uh, month of gross is gonna add up to this amount and in this amount in your three, So that's the total. You're gonna cash flow over the three year duration so you can calculate your rate of return over a three year period, or you can divide it by three and break it down as a per annum basis. Rate of return. Usually, when you pitch this to other investors, you're gonna want to use the most favorable looking members as possible. So you might want a structure as a three year cash flow. But don't be sneaky. Disclose everything, explain. That's three years. They're big, big girls and boys. They can do their own math, and that's their responsibility. But you know, obviously you're gonna want make the deal look attractive and show the total gains rather than maybe a parental basis, because a lot of these people are also going to thinking longer term anyway. So leave it to you, however, you want to do it again. This is the breakdown, so your monthly rent option credits total After three years. This amount you add your two income streams, so the the combined cash flow and option credit, plus your gross on the sale. And this is after a two year by out as well. So they break it down into your buyout in the three year about. So that's it. It's pretty straightforward again. You can do this. Deal a couple ways to increase your rate of return. The one way is to bring in a ah partner or bringing private money and pay a flat fee. Partners are going to mitigate a bit of your liability, which is kind of nice. Also, you need to qualify for a loan, maybe how everyone structure it. Private money is going to be a flat fee, so you're gonna increase your rate of return significantly because you're not paying out on the upside of the sale of the property the other way, you can do it again. We talked a little bit about sandwich lease. This spreadsheet is not equipped to show you the roots returns on the sandwich leads lease option. It's pretty straightforward. Utkan. You can run the numbers by paper or you could get in the spreadsheet, This bridge she's just equipped to do the basic lease option I just have done in the past the numbers based on paper. It's grueling and laborious, but I do those for the deal that I'm going to get into. I just like to see and for sure control each number rather than leave it up to calculations were missing something in a box somewhere. I'm just not very good technology. But if you are follow spreadsheets, you can go out and find other investors that have maybe sandwich least often spreadsheets, but that that's it. That's the least option spreadsheet, pretty straightforward. 22. 21 Buy Fix Sell: uh, so in this deal, 5% is not too great. So you can play around with numbers and figure out what kind of return that would satisfy you. Present your offer based on that. What I want to do now, though, is to just because all that's important is just now showing you the power of leverage and how you can maximize your returns on these deal and mitigate ability. Risk. So let's suppose you work with someone for me. They're a little bit older than you. They're getting close to their retirement years. They've got a whole bunch of cash say they're not happy with their returns in Canada. We got our SPS that yields a very low interest rate of return. Maybe they're more interested in working into some real estate. So again, there are ways that you can use RSP money in real estate transactions as long as their arms length. If you don't related to this person. So let's suppose in this example you say you know what? I don't want to put in 60,000. I want to put in. Maybe you want to put in 5% down, right? So you're gonna get 80% from the bank, and you wanna borrow 15% from somebody, right? So you say to someone your coworker, You know, I've got this sweet deal. I'm gonna do it all kinds of crazy stuff We're gonna sell for this. You showing the spreadsheet? However, let's just say you convince them Not everybody's gonna be into this right, because they want to play it safe route. But maybe you have a great relationship with them with this person. They believe in you. Whatever the case may be, let's suppose just to keep things quick, you convince some 15% of 300,000 is going to be 45,000 so the 5% remaining is 15 grand. So let's say you got 14 that you're putting into this deal now, right? And let's suppose you pay the the person you borrowed that money from you pay them what would be good on 45,000 And like if you give him five grand, right, so five divided by 45 it's 11% return. Let's suppose they're getting 4% on there are recipes and say, Hey, I can almost triple that. I'll give you five grand for letting me borrow your money for four months. Let's assume they're on board with this, that they got the cash kicking around. Not even ours. Piece, Right? They just want five grand for nothing. So let's say you just pay a flat fee. $5000 for private money so your mortgage amount is going to be 240. Still, that doesn't change because you haven't changed the amount that you borrowed from the bank . But you borrow this other cash to put it in the deal, right? So now you're 1000 your 1000 bucks, plus your 14,000 gives you 15 your closing costs. Now it's $5000 higher. So goes to 50,000. Look what happens here. This is very interesting. So all of a sudden, by borrowing the 15% that you would have otherwise put of your own cash into the deal, you got a tremendous amount of leverage here. You've turned a deal that made no sense into a fantastic deal. Or did you? No, you didn't. Oh, so yeah, you would increase your mortgage. Okay, so let's just backtrack a little bit and change that mortgage meant So you definitely want to count for that amount that you borrowed. So you borrowed 45,000. So the to 85 that you're borrowing. Oh, how does that figure put? 15 grand in pay. Five grand. Why is your return less? It was just a old because it was just a bad deal to begin with. Yeah. No, I guess that was good. So, plus, yeah. So what you do is yes. You've got your 15 grand in, but you're paying back $30,000. Yeah, that's it. So you make the same amount. You just reduce the who? What? Where it's coming from, Right. So for it. So if you put in the 40 So I will be 59 again. All right, So you've paid the five grand, because either way, the sale of the property is gonna be here. Yeah, you're losing money there, so it has to do with being around. All right, so let's assume that you don't want to do the 5% return. That's obviously a waste of everybody's time. So now you gotta figure out. At what price point do I have to get this property at? In order for this thing to make sense. So Okay, so 5% obviously doesn't work to move the example on. Let's just say it. After repair value, the market was already it was for 10 years ago. That makes everything a lot better. So the 1% that's a little better, actually. So the great thing about this is the target that we recommend is to go for about 3% return on your money when you're investing. So in this case, you're getting 20%. But remember, this is based on a six month calculation. So your return actually is gonna be higher, Most likely. But even if we're just assuming at six months, you double that. Your return is actually 42% so that 3% is based on a Paranthan calculation, so random per year in this case 21% is 42% per year. So that's a great rate of return on this deal. But maybe you don't like the fact that you're amount is 12,000 so you can negotiate a better deal if you like. If you are more focused on increasing your rate of return, which we recommend, because what that means is that percentage rate of return means that the less of your own cash, the higher percentage you get, the more your cash is going into other deals. And mawr uh, leverage you have by using other people's money by making the most the highest, best use of your own capital and doing more deals. So with that, let's look at the second example now, which is let's suppose hypothetically, Ah, coworker of yours is maybe a little bit older than you. They have a lot of savings. Or maybe they put their money into an interest bearing savings account like a retirement plan. In Canada, you can use your RS peas and again, an arms like transaction. You have to get that set up. But let's suppose that you you do all that. You figure all that out. You wanna borrow 15% as a second position loan on this property. So you're still gonna keep 80% from the bank. You're gonna borrow 15% from this co worker who trust you loves. You don't like good stuff, so 15% is going to be about 45,000 and you're gonna have to make up the 5% on your cash to close here, So 5% going to 15 grand. So my after 1000 that means 14,000. And what you're gonna do because you're such a nice person, is you're gonna say, you know what? Thanks for. Let me use your cash. I'm gonna give you five grand. $5000 on $45,000 about 11%. So, you know, in most interest bearing savings or retirement plans or mutual funds or whatever, you're probably looking around 33 to 5% so you could tell him. Hey, look, I can basically triple your return in half the time you're 30 round. I'll pay you five grand plus all your initial investment back in four months in the other space before you add that fee. That's a flat fee that you negotiated with this private lending source. And let's see what happens here. So all of a sudden you're gonna pay back their initial amount, right? So you borrowed 45 you paid five grand. So basically, if we wanted to the math quickly, you can just erase this and put back the original number that you borrowed and then add five grand to it right? Yeah. So put chicken in there and put five grand. We'll see what the difference was in your So you're making a total of $7000 by doing that. But the actual the actual amount that you're putting in of your own capital is 14. So the 7000 to 58 divided by your 15,000 plus your other costs. So 15 So total cost is done here, right? Oh, no. It's just all done there. Okay, so your costs are gonna be 20 to 8. Plus 84 sets. Three was 312 and then 50. So 81. So we're looking at about 7000 to 58 divided by 81. Your knitting. 12,000 bucks. So you just might ask you the 5000 from that. And then you get 7000 to 58. It's now 7000 to 58. You're dividing that by total cash requirements here. Here, that gives you seven so divine that by 7000 three, 500 gives you about 10%. So you so you make a little bit less, but you, um, get to use more of your own cash. All right. Well, your return is almost halved. Okay, so then still using less of your own cash, you could do more deals. So now look what happens here. You've got your total profit of 53 thousands, for which you owe the initial investment back to the investors work to you, which is 45 this 45,000 plus the $5000 fee that you're paying them. So that's 50,000. So that leaves you with $3158. Which is good, right? Cause yeah. Yeah. So, by by putting in that now, you're only making three grand. It's when we just start the whole example from borrowing the 59 from borrowing. The, uh, your city borrowed 10. Give him 2.5 grand. Uh huh. So let's just make sure that's good this time. So 30,000 we're putting down between nine. Right? And then you're gonna pay three Grandal's and you're borrowing 30 grand. So now you're making, uh, 9858 on 3000 bucks, which is pretty good Return. Well, starting on three thousands on six, though. About 10%. So 33 per year. I mean, the worst case scenario is 20%. Maybe kind of the other drink about, uh, making 3%. Never. It is still you can spit up your cash more deals. Okay, let's just go that route because it's still true. Case of 45,000 here and then was your our sorry 15? All right. Uh, okay, So from the top, one more time. Or is my 5% return rising? 21%. What did I take out? Oh, I put in the fight before 10. Right. So let's assume that 5% obviously makes zero sense. Obviously, you wouldn't purchase a property and do that. So I'm just gonna cheat a little bit. And let's just say the whole time the market was actually foreign. 10,000. So now it makes sense to buy the property $300,000 because your rate of return is 21%. So you can kind of work backwards. New math, backwards with spreadsheet. Just get comfortable using the spreadsheet. That's the whole point of this. Play around the numbers and see what makes sense for you in that market and start making offers according that. So we see that 21% now makes a whole lot of sense. But does it make sense to use less of your own money and get into more deals? Okay, so let's assume that you work with somebody there a little bit older than you. They have a little more savings. Or maybe they have some stuff in retirement. Savings plans are interest bearing savings accounts. They've got mutual funds are species all that good stuff. So in those cases, typically the they're not going to be much more than three or 4% at most. They're not gonna be savvy investors, I presume. So let's suppose you want to put in 10% down on this deal, which is going to 30,000 bucks or 29,000 plus the $1000 deposit, and you're gonna borrow the other $30,000 from your workmate, and you offer them maybe three grands. So it's worth their while, right? So you're gonna pay them a $3000 flat fee in exchange for borrowing their 30,000 bucks. And what happens is here. This is no longer reliable because your pain back the $30,000 investments were really just making the 9858 bucks. But if you look at the actual costs of your of your cash, you're still gonna get 8 9058 divided by your costs. And there is a difference. By the way your cash on cash return is figured here. The total amount of cost is different that you're selling costs, but that's made up by the actual profit from the property. So we don't consider that the cash on cash turn your cash. Your personal investment is all the other stuff In the beginning, as calculated here, this is your personal cash. Your cash on cash return is going to calculated by dividing your amount earned. So in this case would be 9158. Because you're paying back to $30,000 to your buddy. Divide that by the 86,800 and that gives you about 11 11% a little bit more than 11%. So, Paranthan that's a 22% rate of return. That's obviously not exquisite. It's not a super tremendous deal, so maybe you go back and you try and get a better purchase price or or better terms with the seller work out whatever kind of deal you can for to get to the number that you want. But the point is, you're now able you've got that 3000 bucks that was tied up before this deal. Now you could do two deals like this. So instead of just doing the one deal and getting the 20% return you're getting, ah, 44% return. Plus, you're helping out your buddies who were gonna want to do more deals with you, and you can figure out all kinds of fees and calculations that make more sense based on what kind of house you want to get. But that's just a quick kind of run through the buying fix and sell model. As long as you got your safety is in place. You can play around with whatever returns. You can even take a little bit less because you're pretty confident that you should be able to make a lot more. As long as you get that minimum return. Based on those cushions, you're gonna exceed your expectations every time you exceed your partner's expectations. That's probably the best way to do it. If you're doing in a hot market like in Toronto, for instance, I don't base my I mean I based my number and is close to realistic expectations as possible . We can't keep the property for more than four months. It's just no way to do that, because a lot of our way to our deals. It's a combination of private money and secondary money, hard money, and they're going to charge fees. Eso that the other thing here, that other fi portion you're gonna If you're doing a private loan, you have to pay the mortgage broker their fee, which is gonna match the lending fee. So that's just the cost for you to borrow. In addition to the interest rate paid out monthly, which can be as low as probably 5% that's probably low is gonna go definite for, at least currently 5%. Probably low is going to get so between five and maybe even 18 or 20% which could make sense to you. If you know that you could get in the deal, get get out quick. If you know it's a super terrific deal and someone's going to take on that risk, they're gonna charge him or interest, but you're gonna make a ton of money, so it'll make sense sharing it out. Yeah, so when we do our deals, that's the way we're going to structure it. We're gonna have the fees, the cost of borrowing and Toronto. There's a huge upside because we're kind of playing the market, which I suggested that you don't do. I don't like investing that way. It's riskier. But there is a greater upside because that risk So in Toronto, because I'm I live in it. That's where I invest. Sometimes you need to get a huge upside, but we're gonna get his accurate account numbers. This calculation doesn't really figure into a market like this, because if you did that kind of calculation, it would make zero sense for you to invest here. This is the much more conservative route, definitely the route I recommend that you start with when you're just getting into the business. You're just getting a crack at it. Do it this way. All right, that's it, for by fixing self 23. 22 Buy and Hold: So in this deal, 5% is not too great. So you can play around with numbers and figure out what kind of returns that would satisfy you present your offer based on that. All that's important is just now showing you the power of leverage and how you can maximize your returns on these deal and mitigate ability. Risk. So let's suppose you work with someone. Maybe they're a little bit older than you. They're getting close to their retirement years. They've got a whole bunch of cash saved, were not happy with their returns in Canada. We got our SPS that yields a very low interest rate of return. Maybe they're more interested in working into some real estate. So again, there are ways that you can use RSP money in real estate transactions as long as their arms length. If you don't related to this person. So let's suppose in this example you say, you know what? I don't want to put in 60,000. I want to put in. Maybe you want to put in 5% down, right, so you're gonna get 80% from the bank and you wanna borrow 15% from somebody right. So you say to someone your coworker, You know, I've got this sweet deal. I'm gonna do it all kinds of crazy stuff We're gonna sell for this. You showing the spreadsheet? However, let's just say you convince them Not everybody's gonna be into this right, because they want to play the safe route. But maybe you have a great relationship with them. With this person. They believe in you. Whatever the case may be, let's suppose just to keep things quick, you convince some 15% of 300,000 is going to be 45,000 so the 5% remaining is 15 grand. So let's say you got 14 that you're putting into this deal now, right? And let's suppose you pay the the person you borrowed that money from you pay them if you give him five grand. Right, so five divided by 45 it's 11% return. Let's suppose they're getting 4% on there are recipes and say, Hey, I can almost triple that. I'll give you five grand for letting me borrow your money for four months. Let's assume they're on board with this, that they got the cash kicking around not even ours. Piece, Right? They just want five grand for nothing. So let's say you just pay him a flat feet. $5000 for private money, so your mortgage amount is going to be 240. Still, that doesn't change because you haven't changed the amount that you borrowed from the bank . But you've borrowed this other cash to put it in the deal, right? So now you're 1000 or 1000 bucks. Plus, your 14,000 gives you 15 your closing costs. Now it's $5000 higher. So goes to 50,000. Look what happens here. This is very interesting. So all of a sudden, by borrowing the 15% that you would have otherwise put of your own cash into the deal, you got a tremendous amount of leverage here. Okay, Lets just backtrack a little bit and change that mortgage meant. So you definitely want to count for that amount that you've borrowed. So you borrowed 45,000 so the to 85 that you're borrowing Plus Yeah. So what you do is yes. You've got your 15 grand in, but you're paying back $30,000 so I will be 59 again. All right, all right. So let's assume that you don't want to do the 5% return. That's obviously a waste of everybody's time. So now you gotta figure out At what price point do I have to get this property at in order for this thing to make sense? So we see that 21% now makes a whole last sense. But does it make sense to use less of your own money and get into more deals? Okay, so let's assume that you work with somebody there a little bit older than you. They have a little more savings. Or maybe they have some stuff in retirement. Savings plans are interest bearing savings accounts. They've got mutual funds are species all that good stuff. So in those cases, typically the they're not going to be much more than three or 4% at most. They're not gonna be savvy investors, I presume. So let's suppose you want to put in 10% down on this deal, which is going to 30,000 bucks or 29,000 plus the $1000 deposit, and you're gonna borrow the other $30,000 from your workmate and you offer them maybe three grands, so it's worth their while, right? So you're gonna pay them a $3000 flat fee in exchange for borrowing their 30,000 bucks. And what happens is here. This is no longer reliable because your pain back the $30,000 investments were really just making the 9858 bucks. But if you look at the actual costs of your of your cash, you're still gonna get 8 9058 divided by your costs. And there is a difference. By the way your cash on cash return is figured here. The total amount of cost is different that you're selling costs, but that's made up by the actual profit from the property. So we don't consider that the cash on cash Turn your cash. Your personal investment is all the other stuff. In the beginning, as calculated here, this is your personal cash. Your cash on cash return is going to calculated by dividing your amount earned. So in this case would be 9158 because you're paying back to $3000 to your buddy. Divide that by the 86,800 and that gives you about 11 11% a little bit more than 11%. So, Paranthan, that's a 22% rate of return. That's obviously not exquisite. It's not a super tremendous deal. So maybe you go back and you try and get a better purchase price or or better terms with the seller work out whatever kind of deal you can for to get to the number that you want. But the point is, you're now able you've got that 3000 bucks that was tied up before this deal. Now you could do two deals like this. So instead of just doing the one deal and getting the 20% return you're getting, ah, 44% return. Plus, you're helping out your buddies who were gonna want to do more deals with you, and you can figure out all kinds of fees and calculations that make more sense based on what kind of house you want to get. But that's just a quick kind of run through the buying fix and sell model. As long as you got your safety is in place, you can play around with whatever returns you can even take a little bit less because you're pretty confident that you should be able to make a lot more. As long as you get that minimum return based on those cushions, you're gonna exceed your expectations every time you exceed your partner's expectations. That's probably the best way to do it. If you're doing in a hot market like in Toronto, for instance, I don't base my I mean I based my number and is close to realistic expectations as possible . We can't keep the property for more than four months. It's just no way to do that because a lot of our way to our deals. It's a combination of private money and secondary money, hard money, and they're going to charge fees. Eso that the other thing here, that other fi portion you're gonna If you're doing a private loan, you have to pay the mortgage broker their fee, which is gonna match the lending fee. So that's just the cost for you to borrow. In addition to the interest rate paid out monthly, which could be as low as probably 5% that's probably low is gonna go definite for at least currently 5% probably low is going to get so between five and maybe even 18 or 20% which could make sense to you. If you know that you could get in the deal, get get out quick. If you know it's a super terrific deal and someone's going to take on that risk, they're gonna charge him or interest. But you're gonna make a ton of money, so it'll make sense sharing it out. Yeah, so when we do our deals, that's the way we're going to structure it. We're gonna have the fees, the cost of borrowing and Toronto. There's a huge upside because we're kind of playing the market, which I suggested that you don't do. I don't like investing that way. It's riskier. But there is a greater upside because that risk So in Toronto, because I'm I live in it. That's where I invest. Sometimes you need to get a huge upside, but we're gonna get his accurate account of the numbers. This calculation doesn't really figure into a market like this, because if you did that kind of calculation, it would make zero sense for you to invest here. This is the much more conservative route, definitely the route. I recommend that you start with when you're just getting into the business. You're just getting a crack at it. Do it this way. All right. That's it for by fixing self. 24. 23 3 Major Negotiation Points: uh um I wanted to end this course. Let's talk about the most important thing. I have no time. Let's talk about unfortunately, it would take an entire 23 are, of course, to give you all the stuff that you need. So just a little snippet here. Negotiations, negotiations are everything in this business? Um, you you might be driving this bitter news. I know I did the first time I heard it, cause I'm like, I gotta negotiate a lot. I do that. You'll get it. It's a skill just like everything else. Just like everything else in this program, but everything else in life. It's It's a skill that you you're gonna build up over time. Now you've got knowledge. You got to get this skill, right? Uh, with negotiation, you got to remember, everything is gonna be negotiated. You're gonna be negotiating with tenants to rent your properties. You're gonna negotiating with property managers on their fees. You're gonna teach them how to negotiate with tenants and deal with their problems. You're gonna negotiate. I'm borrowing your have to negotiate with your partners. You have to negotiate with sellers. You have to negotiate with buyers. It never ends. Negotiation is all over the place. It is such a encompassing, critical part of your success. Really, though I mean, I tell you all these sexy strategies, right? They don't really matter if you are not effective as a negotiator or if you don't have someone who can do negotiate effectively. But you've got to get good at first when you're starting out. Uh, the most money is going to be made in a few seconds in a few minutes, maybe in a few hours in the negotiation process. It's not gonna be about sneaking out and finding a deal. You could get crazy deal on ah, hot market or or whatever the conditions are, it's all gonna come out through the negotiation themselves and not through the deal itself . The property itself negotiations are all about perceptions. You may have heard of day carts. Famous axiom. I think. Therefore I am. That means a lot of things. One of the main things that he's hitting at with that is that you could doubt virtually everything you actually could do everything. Uh, one thing, though that you can't doubt is that if things are being doubted, if you have access that That must be your the one doubting it. That's your mind. You can't deny that. If you doubt everything that that is for certain, you are doubting everything. So you can't get around that. What does that mean with the garden negotiations? What that means is, as a negotiator, you deal in perceptions you don't particularly care one way or the other. What is true, Riel? What the facts are that is none of your concern. All that you need to do is manage the perceptions of the person that you're negotiating with. You want to be able to give them the perception that you've got options, right, that they don't have options and that you guys got to come together, toe relieve their problem. That is more or less the crux of how negotiations work, all about options and actually the perception of really have to have options long as they are convinced that they don't. And that you do. That's how you win a negotiation. So I'm gonna leave you with three major negotiation points toe take away with you toe, start your investment career again. Negotiation, like I just said, is the most important thing. We've got some resources include in this program that we suggest that you go tap into There's a tie information that you can get on how to negotiate. But it would seriously take a whole other to our course just for negotiation. So we're just gonna leave with these three. But these were very critical there enough for you to get started and toe to build on. So number one, this is a book less to do with real estate investing. But what I would recommend that you go out and get probably the most important book you'll ever get is a book called How to Win Friends and Influence People. In this book, Dale Carnegie more or less makes a plea to you to just sort of be nice to everybody. Just just be the kind of person that other people want to be around. Why do you want to be that way? Well, because when you build the habit of giving a shit about someone else and their problems, you become a problem solver is a lot of value in problem solvers. We That's what this whole course has been about. You're finding the stress people. They got problems. You got to figure out what the problem is and you gotta send out. You're gonna pdc a it right. You'll send in a couple offers to try and see where they're at and what's gonna work for them. It is a bit of a problem solving puzzles, sort of super speed. I see what pieces fit together there, but that's what you're doing is you're solving their problem. You can't do that. If you don't care about them. You have to take a genuine interest, see where they're coming from. I tried to circumvent this path just by hammering offers and going in negotiating. That's my go to my natural style is just to get control and force them to do it. It didn't really work out so well. I mean, a lot of people angry. I made stupid mistakes, got embarrassed, whatever. That's fine. It's part of the learning experience, whatever. But I'm telling you, get that habit giving a shit. Go get that book. Uh, every time you see someone doesn't matter if they're the janitor or you know that you're going Teoh out to dinner and the waitress comes by, find something nice to comment about them, make them feel important. Ask them how their day is and why Just take a couple seconds to do this. Why, first of all, because that's the way people deserve to be treated. Second of all, no one does that. You're going to stand out. You're gonna give them what they really want, which is to be heard to feel like they matter. And you're gonna find out a bit about what they're going through. This is pretty much a general networking strategy, but specifically tied back to negotiations. When you find out what's really going on with this out, what really is their problem? You earn their trust, they'll tell you and they'll work with it. There's lots of times were offers will get rejected that were actually higher than even that I put out. Ah, they just They see the offer. That's higher. They see your offer. They know you. They like you. They go with that offer, they lose money. I don't know it's crazy, but it happens. Um, give it. Give a crap you should. And don't Don't take this the wrong way. I'm not suggesting you go out. You butter people up just to get a bunch of freebies. Don't do that. Don't mess with people and take advantage. Just genuinely find out how to genuinely care about them. Or maybe you're not a dirtbag like me. And you already care about people. Move your sorry, a skill set for you, But if it's not, it's not. Not for everybody. Get that book. Figure out how to care. Be a problem solver. Find out where they're at and help him out. The second point directly to use in your negotiations is you'll find over time more often than not that when you're in a negotiation, you're going to meet somewhere in the middle. You're gonna have your point. They're gonna have their point more often than that, you're going to find a way to meet in the middle. That's kind of our culture. It's Ah, it's Ah, it's just a culture of fairness that we have. Um you know, I just meet me halfway and then well, you know, that always seems to be the way it ends. So whenever you set up on offer on you begin, negotiations is gonna be the opening stages of negotiation, right? You're going to see what their standpoint is what yours is. You're gonna want to know ahead of time, where you want to end up, right? That's going to be so just to put it in the numbers, it's gonna halfway. So if you got a property right, you want to get the property for $75,000 right? They're asking $100,000. Okay. So where should you put your offer for your offer of $50,000? I don't You might be thinking That's ridiculous. Why would they accept the $50,000? Don't worry about that stuff yet. You want to get them to feel like they've worked you upto what their expectation was You want to do this? And this is another tip because they will feel like they have won something. They got something of a deal. You want to let them have that ego? You don't want to dominate someone. If you go in with the attitude, take her to leave it. You try and do what I know I did there. They might just say You know what? Forget this guy. I don't deal with them. They might be in a serious situation, but they just be so irritated by your arrogant attitude, my arrogant attitude that they'll just reject you out, right? You got have them feel like they did something to make the negotiation work for them. That's the win win way. Um, but again, just to go back to it, um, this meat in the middle proposition, right? Started 50 there at 100. Inevitably, you're gonna find a way to meet 75 or 80 and then you get free the cover expenses for whatever else, some kind of middle ground. Whatever you're gonna get there, that's that's a strategy. That's a technique. It's pretty common that you're going up there is just so you know, when you set up your strategy, which you offer, try and get that middle ground. All right, The 3rd 1 this is the last little tip I'm gonna unleash on you, so make sure you get this one. This is pretty important again. It actually kind of ties all three together, but it's simply ask for more than you expect to get so a minute ago. $50,000 seems outrageous. They're asking 100. How in the hell are you gonna get that offer except okay. You're never gonna enter into negotiation going. I want this. Exactly what this exactly. And this Exactly. And then you submit it because again, the Eagles that you gotta leave some wiggle room, you gotta have them win a little bit. You know, you gotta you gotta ask for way too much. So that again, is it managed to you? You give them something that you don't even need. I I have secured Ah, a lot of deals by presenting an offer and getting angry Phone call. What is this? I we agreed to this. I'm never gonna do that it up. And I say, OK, wait a minute. So are you saying that you didn't like this this in this? And they say, Yeah, I say, Okay, they're gone. Anything else they might go. Yeah, I also didn't like this one very much. Okay, that's going to anything else. They feel like Holy shit. I just got all this stuff off this guy. It was so easy. This guy's a sucker. You didn't have anything to lose by goodbye. Asking for more than you're expecting to get. And you've got wiggle room. You've got a way to have them win. You've got a way to give them something on. And you've got a way to get potentially more than you even thought. Don't assume anything in a negotiation. Throw stuff out and see what sticks. Pdc a The negotiation. See what happens if you ask for something outrageous. If they never call you back, who cares? Unit Nothing. You just presented an offer. They don't accept that. Not a big deal going to another one or follow up and say, you know, is there anything that you want to discuss Or, you know, if you change your mind to call me back, you got my number? Whatever. Just just ask for more. You expect to get to give me the opportunity to have them win and to get more of negotiation for you. That's kind of again the win win philosophy behind negotiations. So that's it. That that's everything to do with negotiations. Go out and get the book that we recommend. Learn as much as you can get another course. Focus on that and develop those have. It's be nice to people when you're even going to restaurant, ask for free dessert, whatever they just get used to getting. I was real uncomfortable asking for stuff for us. Just get the habit to get its the only way to attack that you're never gonna get back. Thinking harder. Go practice it on things that don't matter. Get yourself ready for when you actually have to bring it to an offer. 25. 24 Offers: uh so I want to just do a quick, uh, run through on offers, so I wanted potentially will do a whole course on options and negotiation. Right now, I just want to go through some of the basics, right? So when you make an offer, it's all part of the negotiation process is a nice little show and you have tow sit down with the owner and presented nice and neat. But before you even get to that stage, you need to find the sellers who want to work with you. So rather than putting in the the full offer, there's something called the letter of intent. So what you do with this? It's a straight up just a plain basic word document where you explain to the seller your intent to purchase or you could explain to the Realtor. Letters of intent are a little bit some people reacting, but negatively. So you just gotta manage their expectations. And you say, You know, look, I'm doing hundreds of offers every couple of days, and I can't just go through the process of doing entire offer if I don't even know if the owner is gonna accept my terms and price. So this is just a quick way of doing it. And that's how I do it. So just just sort of stand your ground and that they should be amenable to that. If they're interested in selling. If that the kind of people are actually motivated to do a deal, they will accept it. So this is this is the letter of intent. So, dear sir, phone book review them from your supplied by. Either you talk with the owner and you get the information on them or you get to the Realtor. I would like to notify you my intention enough on your property with falling basic terms and conditions. So what I always do is I submit two letters of intent. The reason I do that is when you give a person an option in either or rather than one option, that probably isn't gonna work for them, either, or scenario tends to. I'm not sure what I want to call it like a a cognitive bias or a trap or whatever you want to call it. But it just gives the person that feeling like Okay, well, I got choose between one or the other rather than I don't like this offer. I don't really want to call it a trick. I mean, if the person wants to accept the offer, they accept the offer. That's the bottom line. So But it is. It is a trend. I would say that if you offer multiple options, that it makes the seller feel like they have to decide between those rather than come back to you with the brand new one. It's a lot easier. Teoh. You sort of set yourself up for agreement. That way, with this one, I do a straight up cash offer. Now, this number is gonna be, ah, wholesale purchase number that you're gonna determine when you go through spreadsheets and do do the math, it's gonna be much lower than what they expected. And with their with their wish prices. This is there. I'm trying to find their walk away Price. Now this is below the walk away price. I think that they're gonna I want to do so. They're probably to come back at me with No, that's where the other option comes in the option that you really want them to take, which is a better purchase price but with then holding some of financing. May me right now, I just walking through this, you explain that the offer is gonna be conditional on mortgage financing partners, bro, these are just sort of straight up conditions, and you can take these away or add more, depending on what kind of mark your in or what you think is working your feedback from the Realtors saying, What do you mean for mortgage financing that you're gonna buy in cash or, you know, whatever you could take that out and put in partners approval. Some realtors don't like that as well, because that's totally ambiguous from union partners. Approve. When you could just say, you can pull out last second based on partners approval and they're not gonna like that. But when you're dealing with every day sellers, they don't really know this stuff, so they probably just accept your offer. It your letter intent like that. Should you be interested in covering this letter? Intend to a full offer to purchase, please sign the document for eight hours, you throw in your second chair and again it points out that this is not a legally binding offer. It's just a letter of intent. It's just so you could simply shoot as many offers as possible and and see if the owners are willing to begin negotiating. So this is basically you're setting up your opening position in negotiations. You're gonna want it. Entice the owner to come back at you with their opening position negotiations and try and bring them to your preferred price in terms so menacing signed their date. You sign there. I also include a bigger watermark in the center of the page so that they see my logo everywhere. It looks like more professional. You have the option. Do that, too. So that's the on on the same property. That's the first offer. This is the 2nd 1 I present them both at the same time, I e. Momento. So this one's a little bit higher. Of course, here's the extra apart that wasn't in the previous letter of intent. This is the one that explains the vendor. Take back mortgage. So talked about this a little bit. This is the wholesale term portion of your negotiation, or at least a part of the wholesale turn portion of your negotiation. You're going to have the vendor take back the 15 grand off of this. So really, you're getting back to about the 1 35 mark, But you're paying them a bit of an interest payment. So in this case, I think I remember this was a couple of years. A few years ago, the vendor was a little bit more interested in getting a higher rate of return of the interest cause they had done loans before at six or eight. But obviously, I'm gonna start lower. Also, they're in a position where they need to sell. So this is kind of generous, actually. But when I did the numbers, it worked out didn't matter. I don't even think this deal worked. Which is gonna happen a lot because again, out of every 100 deals, maybe 1 to 2, we're gonna be the ones that you actually close on. Ah, lot of them. You'll get maybe accepted. Then they fall apart, either during to do due diligence or during negotiations. That's the game. It's a numbers game. And that's why the letter from 10 is so important. You want to fire off his main these as possible. You want to go through the laborious process of filling out an offer to purchase if they don't even want to talk with you at this price point. Right? So, again, all the same stuff here. Straightforward, right? I'm going to show you just a basic. So in Ontario, the Mantra Real Estate Association has this as their standard agreement purchases sale. This is what the Realtors use the form 100. I'm not gonna fill this out. You need to work. I mean, simply put, make friends go network, be buddies with a realtor, fill this out, send it over to them. Say, Hey, I was thinking about putting on offer. Would you just tell me that? Did I miss anything? Here is this makes sense and kind of get into the flow of how the realtors do it in that area and make sure they cover everything for you. Now they The reason I say you have to be friends with them is because if you just sent us off to a realtor, they're not gonna care. We're gonna waste your time. But if you are genuinely friends with, um agent, this takes a little time and say, Look, you know, I'm just kind of getting started out. I want to make a bunch of offers and test out the market. In the meantime, I want you to go find me deals, you know, whatever kind of arrangement when we're gone with them, just get them to help me out with this or working on investor. There's just I mean, this is why you do the letter of intent. I mean, these are the standard conditions, by the way, in any offer, it lays out everything that would be fair between the buyer side and the seller side. Nation on gets screwed. Important thing here is the taxes portion. When you're gonna do your offers, the taxes, the GSC are going included in your offer. You don't want to be making an offer and then get surprised with paying taxes in addition to the offer you put and that's going to Austria big time. So always put included in there. But again, this is gonna covered by your when you run through with the Realtor of the investor. Oh, and again, you're gonna be making the offer, your name or your company's name and or assigns. You always want to do that because when you get into your schedule A here, and you start putting in your conditions on the purchase. Your one your conditions is going to be that you have the right to assign the deal to another investor. And again, we talked about that in the course. You load up this bad boy with his many conditions possible, you could have multiple schedule a sheets, just just print off a bunch of them and on and fill in on your computer with your conditions and have the seller strike off. One of they don't like. I mean, obviously not everyone's gonna happy with, like 1000 conditions. So sometimes we're gonna be putting in maybe five or six, maybe one, depending on your market, maybe none. But if you can start by putting out many conditions, see what the reactions are in your market. Talk with realtors that you're putting your offers and say, Why didn't they like it or write it so I can just kind of get an idea of what conditions fly and what don't, um and especially if they don't include them anyway in any offer, so that you allow them Teoh feel like they've won by taking out some of the conditions and getting themselves a cleaner, stronger offer. That's again part of the negotiation strategy, yet that that's that's it. So you can get all kinds of agreement purchase and sale forms online. Com Free. This is the Ontario one. Wherever it is that you are, you can find them all just by Googling just Google agreement, purchase and sale form and you'll find him. They're out there on. And in this case, because you're not using a Realtor you made just cross this out in the event that you are making these offers with a listing agent. So the seller's agent you can work in their information here and say, Look, I'll give you You can collect a double end commission by representing me as the buyer and representing the listing the seller. Or you could tell him straight up. I don't need you cross this out and they're only gonna collect the commission for listing, which both of which, by the way, are always paid by the seller. So you don't have to worry about paying out on that. You want to figure that in your calculations? Yeah, so that's it 26. 25 Conclusion: uh, congratulations. You made it through the course. You now ready to begin this new careerist new adventure in real estate investing. I want to thank you for taking the course of us. Addition to congratulating you on completing it. I think probably the first thing you should do right now is go out and reward yourself. Maybe go to a coffee shop. Grab Ah, crumpet. Ah, apparently I'm from England. You get get a crumpet, you get a coffee and you sit down and you do a little bit of reflecting. Figure out what kind of life you want, how you can get there with real estate and really droughts and figures. You know, how can I get $1000 in two months or one year? How can I be job optional in the next two years or whatever it is? Do some soul searching. Figure out where it is. If you want to go get excited. Figure out why you're doing this before you get started. And certainly reward yourself tonight right after this lesson. Go out and do it again. I encourage you to get out there. Network Network Network. Don't get there and sit on your phone and you know they'll be weird. Go. Just say be nice. It'd be nice to people. Dale Carnegie. How you doing? Where you at? Why, you hear? What's that? You know, figure out what's going on, Meet them at their level. Become a part of their life for just a little bit. Making little happy. You never know. Ah, don't judge a book by its cover. My next door neighbor gave me practically a grand for nothing. You don't know who you're gonna meet who could be a partner for you or could be a source of financing or could get you to a deal You just never know. Go out there, Network strongly. Encourage it. The other thing. Continue your education. First, I'll get a mentor, right? That's the best way. Continue education, but keep reading. You're gonna wanna be able to keep up with your mentor. So, having understanding what they're talking about, get some books, get somewhere seminars, get some audios, tap into all the resources we took time to put these reason during Do it. Go use the spreadsheets, practicing some fake deals or ah, maybe go out, start putting out offers right away. whatever works for you. Um, get into this material and ah, make it a habit to become a student for life. Continue. Your education is so important. And so much, so much more of a relief when you actually have the knowledge that you need to take the steps that you need to get to where you want to go. Start first with the education, but also scaffold do a little bit. Meet the mentors. Get out there, Do it! 27. 26 Real Estate Bonus: So we thought we talked a bit about flipping properties in Toronto and, um, show an example of one that, um, I'm going to start by showing example of one that I did last year. So this property I flipped last year luxury with my wife. It's, Ah, two bedroom, two bathroom condo in Scarborough. I bought it at the beginning of March for 190,000 March 2016. So a year ago, basically a year ago. So we did a full renovation. Just made everything look new. And that's one of the reasons I love condos, because you don't have to worry about landscaping and roofs and h fac. It's just a concrete block box inside, and you can make everything look pretty again for pretty reasonable cost. So this is, you can see it looks completely different, and it was a pretty easy renovation. We spent about over $30,000 doing everything, including the kitchen, and you can see on the finishes to its I would consider this pretty generic of a renovation where you try to appeal to what it seems most people want versus customizing to the tastes and that's market. It's certain parts of Toronto to you'll kind of specialize or make a property very unique with very fancy features on each property. But this at this price point, you're really just trying to make everything look acceptable. Everything looking new. So and that's part of this is making everything new. Um, sometimes people do flips and they don't finish, so they decide. Oh, we're gonna do new floors and, ah, a new toilet and reach re tile around the shower. But we're leaving the bathtub the way it is, and we're going to reuse this part, and the kitchen cabinets will just paint. And then it's not. It's not a finished flip. And buyers who who want to pay for the finished product when they're paying top dollar for the finished product they 100% done so you might spend 80% of money. But you're not increasing the value by 80% that you would be able to and it on the reverse side. You can also go too far, very, very easily. I'm sure all of you can imagine, but there are certain things that when you reach a certain price point, you just can't push a property in an area above a certain price point, you can spend an extra $10,000 to increase the price by an extra 5000. Do you really have to try to balance? At what point have I done enough to this property? And I find landscaping is one of those things where on one property, I spent way too much time on Saad. I had a bad contractor, one out there myself to pull it all this Saad and put in some new stuff. It was a mess. It sought is one of those things. I didn't think if I had to do that property again, I would have thrown down some soil there. Don't succeed early on, and it would have looked good enough for me to probably get about the same price. I didn't have to spend what I spent doing the outside landscaping. So one thing we did was also we opened up part of the kitchen wall on this side and here because there was a sunroom off of the kitchen was completely closed in. This is the same wall, and the sun was completely coast in. The kitchen was so dark there's all of these windows in this tiny little sun rooms only this wide. All these windows. But the light doesn't really reach the kitchen, so and, of course, they had a fridge in the sunroom, so you can see how dark this was. It makes a huge difference just to allow the light to get into the kitchen. This is the master on street. There's an old Jacuzzi with burn marks, and I think they were selling drugs out of this unit beforehand. There was measuring tools and holes in the walls. The height, things so way fixed the holes in the walls. Yeah, why does he think? No, no comment thing. This is the you can see the finished bathroom. This is the second bathroom master. Completely different missing closet doors. I like to do the mirror closet ones attends to open up The space looks new, of course, and I try where I can. You can't really see here, but I leave the plastic on the edges. Things like. That's what people see. This is brand new. You can pull off the plastic yourself when you buy it. Same thing on the appliances. I leave the plastic. Everything looks new and people seem to like that. And, yeah, one of the great things about this condos. There's this bedroom on the side here and then the masters on the other side, so they're fully separated. So it's a really nice layout, and it's a corner. It was a really nice unit, and what really sold this unit was that it faced east and you could see the mosque facing east. So there was. The building was a mix of Chinese and Muslim, mostly, Um, and there was a huge appeal to the Muslim buyers because you could face East and the mosque . So that was also a great a great feature for selling. So I bought it for 190,000 sold it three months later, just under three months later from closing to closing. We actually it renovated and then sold it in about two days. Three days, maybe, um, and the closing was less than 30 days. So we renovated and sold it in within two months, closed within three, and so I bought it for 190 sold for 2 85 renovation was just under 30,000 and other expenses, such as the appraisal getting your FOBS status certificate. King Land transfer, tax agent commissions. Um, and legal fees came after another 27,000. So we made about $40,000 on this flip in three months. $190,000. And that's one The reasons I love condos, because you see how much that condo changed and the renovation was $28,000. So with all the noise, the mess. This is an older building, and I find there's some older buildings I lived in one downtown that they take beautiful care of because it's a nice building with people who have a bit more money and are willing to pay toe, have more amenities I find in most of the older buildings, they're trying to cut costs wherever they can. Management never has enough time. So most of the older buildings, especially not right in the downtown core, the management doesn't have time to deal with it. They were happy that we told them we were doing a renovation and filled out the form. So they say on you know, you have to use the service elevator, book it every time you're moving materials. I think we book that the first time and they didn't care. We booked the room for to have a been, I think the first day when we get that everything. So the the service room, I guess. The garbage room. Um, we're allowed to do that. But otherwise, nobody bothered us because we gave them notice they delivered a notice to every unit and that would be affected That yes. So the condo does that. So we there was tiles in the kitchen. We had to jackhammer that up. We knew that was gonna be right. At the beginning. 1st 2 days, it was gonna be really loud. And so we told them. But this is what we're doing. I don't know that we told the kind of full amount of the work that we're doing, but, you know, part of it was we're taking up the old tile. There's gonna be noise. And they gave notice to all the units. I guess they probably know what they're you know, A few floor units around and a few floors above and below there's gonna be noise within certain hours. So there are other things like you. They couldn't work after six PM or something, but if you're painting, you could be in painting. You could be doing minor things. You just can't be making a lot of noise. And And this was one of those buildings where they're trying to keep costs down. And people kind of this wasn't Ah, high end building where people are finding those building. People are a lot knows year more affected by it, but and they're a little bit more going to complain. So most of the people minded their own business in this building, and we gave the building notice for the requirements needed to They didn't care about using the service elevator or not The building. How many stories is the building? Um, no, I think the building was around 18 floors. Something like that? Yes, it's a It was a complex of two buildings. Um, and this was on the eighth floor. Something like that. Lawrence and Midland? Yes, Intersection. So that's this property. Alex is gonna talk a bit about finding deals and mindset. Yeah. Great. So, uh, this is Ah, fantastic deal. Um, the numbers are excellent, but you might be wondering, How the hell am I going to get $190,000 purchase price in Toronto or the GT A proper? Um, that is a real concern. Especially. We were just talking earlier. The challenge for Realtors on the buying side. I mean, you got these Realtors competing with bids. It's It's near impossible, but it's not impossible to find deals in Toronto. Um, the question is really, Should you be the one going out there working really hard to find these deals? Um, yeah, that's good. But you can also leverage other people's time. And that's a really critical component, actually leverages a key aspect. Investments all over. I mean, if you're looking at deals, you think, How can I get into a $7000 property? I've only got 20 grand. You probably shouldn't do that deal, but you could talk to a mortgage broker, right? So let's let's get in it. So actually, this is a bit of a misnomer. It's finding deals, money and partners in three steps with sub steps. So step number one with 10 other stuff. It's not easy. I'm sorry it isn't. You gotta work. Eso First of all, if you're just getting started, find brokers right away. Um, your next step is to find money which could be private. Or you could look at your own hard money lenders, um, partners, finding someone who is where you want to be or someone who is a total expert could be good , but usually they're not going to be on your level. You want to find someone who you can build up with, Um, Realtors. Realtors are, uh, one of the most valuable resources, and I'm gonna get into an actual example that little bit later. But there's also, lastly, homeowners. They're also part of your network because not only are homeowners sometimes looking to sell if they're talking their neighbors, sometimes neighbors go or we're going through a divorce boom. They call you right? This does happen if you given the right incentive. So first of all, brokers have investors. They have hard money, and they have potential deals because they're also aware of people who are looking to liquidate. So some investors, for instance, that are hard money lenders and maybe did a deal. And then they found another deal that's gonna get greater a return. Now they want to pull their cash back out. So if you have a good relationship broken ago. I have an investor who's looking to pull their money out to sell this deal. Maybe you could jump in on it. Um, in addition of the fact that they do have the hard money contacts, which you're gonna need set up before you start going out and looking at deals. Unless you like to live dangerously, you go get deals first. That could also work, but it's good to have things become and already build relationships. Actually, that's the really important things, the whole value. The network is based on meeting up with them regularly, getting to know each other, your goals and building a relationship that goes beyond just numbers. Find out what is that they need and helping them succeed, and they'll reciprocate because that's how they're going to succeed cheaper and better terms and consolidate I. These are the three criteria that are most tremendous with the private lenders, because again, they're not the hard money guys. They're not professionals. These people are just looking to get something better than 3% you got from 6% 2nd double your return and ensure time for him from doing a flip or from doing a buy and hold. Um, better terms. You can work, work out the Maybe If you're doing a flip, you can say, Look, I can't pay you each month, but I can pay you when we sell, um, they qualify for a loan for you. So rather than partnering with them, you can have them qualify and you pay them a fee for I don't want to talk too much about that. Could be a little slippery. There's a bit of fraud element there, but it could be done properly. You can find out how to help local investors. So again, this is the partner section. You go out to these kinds of meet ups, you meet each other. How you doing? Nice to meet you. Where you're from, where you're going, and sooner or later, the subject real estate is gonna come up. You're gonna find out what they're working on. Maybe you're working on the other part that they're missing. Maybe someone's doing flips like really, cause I've been talking a lot of brokers who have a lot of cash. I should have you guys connect. Then you establish a working relationship that way. Tell agents you're buying and you can close, period. Don't lie. Talk to your broker. Be confident that you can close because they have money for you. But talk to agents because of the number. One thing is can I get paid? You want to tell him? Yes, I will. Make sure you get rich. If you give me deals. That's really important. Next call for rents. Drive for dollars. Knock or reverse. Look up. So if you go on K g Uh, if you go on Craigslist, you're going to see for rent ads for days. Don't look for the ones that have special logos or shading in the photos or any kind of fancy stuff like that. Look for a person has one photo with their finger on of like, a door sideways and they say a house for rent. Call me, Please don't bug me too much. Sure. Something just a crappy ad. And then you call up and say something like, man aren't aren't tenants a pain in the ass like man, I tell you. Well, my wife is bugging me. She wants me to get into real estate. So I I know that you were looking to rent this place I'm just warning. If you're interested in selling established communications, see where they're at and chances are they're really annoyed if they're only taking one. Like I got a list this again for rent and deal with always calls. Yeah, we'll solve the problem, especially if they just dealt with an eviction or the trash. The place. You don't want to go through that. They don't have the money to fix it up because it's in rough shape and a lot of real estate investors are willing to sell at the right price. So it comes down to what's the right price for them. At that point, there's always people are willing to sell at a discount as well. At the right time, there's always it's the right price and the right time. Um, if you love a property, you can buy it from an investor. Almost always. You just have to pay a lot. But right, an investor will sell because they're looking at the return on their investment, um, most of the time, but the same time there times when they're just desperate to sell and you can like in this example, I'm talking about mom and pop investor, But there are investors. And we mentioned a minute ago they may have another opportunity to come by and they want to liquidate, right? And then you show up at the right time. Or maybe in the process of buying something and they're worried, and then you show up and say the date, right? You never know. And I added, for the for the money, the biggest thing is finding deals. Because if you have a deal, you can find the money. I love the example. You're on the podcast. Um, if if you if you, uh if you tell me I only have $20,000 I can't buy a property. And I tell you. Okay, I have a $1,000,000 house. I'll sell it You for $50,000. Are you gonna tell me you can't find the other the rest of the money to get that house? It's not her $50,000 just for nothing. Just forgetting the property. All you have to do is find the other 30,000 you're missing, you're going going to find the money. So the thing is, if you getting enough, a good enough deal, there's always money out there, and right now in the market, people are having so much trouble buying deals that there's a lot more money out there. Available is. The main thing is, if you can find a deal, that's that's the main thing to focus on. If you can find a deal, you'll be able to find the money to take care of it. Sometimes you'll be calling for rents on annoying a lot of people, and you might feel burned out. Cool. Good. Put that aside for now and go out and take a drive, but get paid for it. You're driving around your neighborhoods. Maybe you see mail piled up. Maybe you see a boarded up garage door or windows, or you see cracks and windows. Just make a note of the address on, and then you can do it was a couple things. So or actually another good thing is knocking Reverse. Look up would be You're driving for dollars. You get some addresses going for on one yellow pages. Um, type in the address or actual sometimes was better is the postal code and list the addresses for it. You'll find the owner, call him up, and you just sort of say, Hey, I'm an investor in the area I'm looking to purchase properties on. I'm calling everyone in the area just to see if they're interested in selling. Would you be interested in bandit signs putting up signs saying I buy houses, put him on light posts or intersection where people stop and they look in or whatever you're going to look into the municipal regulations on whether you're allowed doing that? Yes, some of them you could staple him on. Yeah, Yeah, look into signed by laws before you do. I don't look at a signed by, Take it off care. Whatever I'll put up there and say like, uh, yellow letters are just gonna be letters that are hand written. They typically will be yellow or pink or blue or something. Just that's eye catching. And you just handwrite it saying again, you know, I'm a local investor. I'm looking to purchase properties in the area. If you're thinking of selling, this is what I offer quick clean sale. In the case of Toronto, you're gonna say obviously no conditions, because if you're buying a Toronto, you're probably not gonna be doing conditions, but you definitely don't want to bring a contractor with you or someone you trust. If you don't know already the science look for on a property that could end up taking more work than you're going to put into it. Um, but that's how you would do that with your letters. Just drop him off in the mailbox with your card or something like an isil picture. And add on that how many of you receive in your mailbox real estate agent postcards all the time, right? Yeah, all the time. A few of them sometimes right that time it. Well, that's why I called. There's there's a you get a ton of post guards, but how often do you get an envelope that's hand written with your name on it? Or owner? Even if its hand written it's not sealed, you're gonna open it and see what's inside postcards. You might just toss, but you're gonna open these and see what's inside, and you don't actually have the hand. Write the letter. There's font websites where you can hand right onto a sheet scan in your handwriting, and you can then type your handwriting and print it out. So simplifies sink in front of him. I found that. I mean, it worked. It worked for you. I've had people call me saying the thinking was my 100 0 wow. That's good fun. I e used actual yellow legal pad line. No, which was very thin and kept getting caught in the printer. But it worked out in the end, and I printed in red, and it looked like and it was it was hand written on the envelope. So I looked. It was had written on the involved. So it was definitely believable that it was all, uh, kg ads again. You can do the for rent, or you can straight up, just look at properties for sale tryingto waste too much time with some of the realtor ads because they're going to say, Oh, yeah, I'll call you back And they're just setting you up in line with other buyers. And, like, you might as well go the listing date or the um, yeah, um, give people a reason. I want to help you. I mean, that should be obvious. No one's gonna help you for free. Give him some incentive, Tom. You're gonna make their life way better. And then they might do you a favor, make offers like crazy, analyzed deals and become a problem solver one per day. Every time you look a deal, if you just look a deal by the numbers, chances are you're not gonna find any deals. Because guess what? There's not a lot of properties out there. They're just making money. You have to make the deal itself. You have to find out what the problem is for the vendor. Maybe there. Maybe they're retiring. They're looking for a fixed income. They may be willing to do a VTB, maybe have a person who is going to get paid up much higher income across the world. And they have to close in three days. Um, talk to your brokers, find a partner who's got cash, whatever. Buying cash, No conditions, quick, clean sale and you'll get a better price. All right, um, so whenever you look at the deals, think of what the deal might need. Figure out what it needs, call them on, solve it, send out, actually misspell that it's L. A wise letter of intent. Letter of intent is just that. It's a letter that you say I intend to buy a property done. It is not legally binding. You do not require a draft to deposit. It's just a quick, simple document. Says um, You know, my name is so and so, Um, usually you'll do it for an ad that's listed by a realtor or fizz bow and say, on reviewing this information, I prepared this number for you and the following basic terms. Do one with just the price. Do another one with, um, a price that slightly higher, but with the option to a VTB and fire off two letters of intent just just firing off all day long properties that are listed because maybe one or two and come back to you. You have to think about it too much. If you actually sit, spend the time to prepare an offer for one deal. You end up maybe in a bidding war situation. You spend time preparing the offer. It's a name. I just I mean, don't do letters of intent in Toronto or you could if you like, but I wouldn't do it outside of the area, couple hours out, where people are more willing to at least look at them. Um, because here, you have to show up with a bag full of cash or diamonds and then they'll start talking to you about maybe selling the property, um, make offers and or assigns in every case on your offer. I mean, in Toronto, if you're listening a property and you see and or assigns, were you thinking if you see and or assigns a top with the next to the buyer's name? Okay, so you probably wouldn't get top dollar first of all, because you're looking for end user. Also, some agents just don't like it. They think that it's your just a person looking at to do wholesale deals and not all wholesale deals will close because they're looking for investors. And then, yeah, and then they and then the Realtor is now tied up the property on goes nowhere. So, uh, that's gonna be something that you want to apply again outside of Toronto. But well, you could still do it here if you explain that you have a corporation. Ah, and you say, Look, the animal sciences just because I'm going to change over the ownership to my corporation. But I'm showing you this my personal name and I'm doing this way and then change. There's a concept wholesaling properties where you buy a property to discount. You sell it probably to another investor on you Sell the contract without closing on the property. Say, I'm I'm gonna buy this property in two months. 400,000 but it's actually worth 130,000. Will you give me 100 10,000 for it? And so you assign the contract for the purchase to someone else. They close on 100,000 and they give you a whole selfie of 10,000 that wholesaling. The best way to do that is to have an assignment condition that says if you assign the property, relieves you of liability so that you, as the buyer are no longer liable If the second person doesn't close, however, a lot of people won't accept that. So you may have be stuck with liability. But even then and for a variety of reasons, like on the property we got together, um, I was the original. Signed it turns out Alex is gonna close on it just the way it worked out the lender we got . But it came after because we didn't set up the financing. I mean, we had obviously financing available, but we didn't pick the particular person that going. Turns out that he wanted me to go on title because I know him. Hey, isn't a look so private individual with the personal relationship with Alex So good, Um, and that condition. Try not to use the word assignment anymore because there's all this news about assignment in BC. People got scared of the word. I don't think it's particularly scary word, but there was apparently Realtors abusing it. I'm sure there's Realtors abusing it in Toronto, to which I've heard of some of using it in Toronto. No, no, it's looking at you, but had nothing todo but so the condition I use basically says that I can change the buyer's name and they agreed to allow me to change. The buyer's name doesn't say the word assignment anywhere it says Aiken. Basically, I changed. I remove me is the buyer and add someone else's job Iike unjust amendment. But I don't even use the word amendment. I don't use the word assignment. I say I'm allowed to change the buyer's name. It's also just like any documents for it. There's no legalese, right? So it doesn't scare people scare me because it doesn't have to be a scary concept. Some people abuse it, and it can be, but it doesn't have to be a scary concept, but people are just scared by the word. So the word you use in a closet can help you get and offer accepted, uh, so close on offers. I know that this is probably a given, but I mean, I personally have had a lot of deals that didn't get to closing for one reason, and it happens, right? But, um, you can either assign them again, which is your end or assigns. That's another exit for you. But look, if you got a deal and you can't close on it, you should close on its a deal. Go find someone. Do you want to do a deal? Okay. Done. Close on it. Don't let a deal fall apart just because you weren't thinking. Just go out. Meet people that do the thinking for you. Okay, So last This is the third stuff. 2030 minutes later, developed a mindset. I put this last. I feel like a lot of people talk about how important mindset is, it is very important. But to me, you can be stupid, have no idea what you're doing and accidentally make money. If you go out and do some stuff, just go out and just knock on doors and, you know, learn as you go develop the mind says you go Don't spend your time reading all these books and think you know everything. And they don't want to work with you because you say you know everything or, you know, whatever. Ah, reverse engineer. Start with the end in mind and do the actions need to get there. So rather than saying I want to make a bunch of money, which I assume that you all want to do Yeah, that's good. But start with saying I want to make a 1,000,000 bucks this year. How am I gonna do it? Okay, well, if I make $40,000 on a condo, Well, maybe I can just go to a condo, a building that no one has touched and then put out a bunch of yellow letters. Maybe I'll get four or 500 contract. Uh, are I guess, in this case, if it's 40,000 per you would want to do was a 25 25 under contract Get 2500 contract, Find the money. Do 25 flips in that one building because the problem is, if you only do one and Luke is e forgot to tell the story telling. So you tell. Yeah, going that. You ruined everything. I were in the building. Yeah, well, for a few reasons. Um, what I find is often after you do a flip in a building, values go up in the building. Surprise. There's a new company. The thing is, there were other flips in the building. I think that when I sold for 2 85 the highest compost to 52 it was a flip, and it's old. Right around the time I was buying, I wanted there was gaps beside the cabin. It's like it just looked horrible. They didn't clean up the construction dust. It was just it was so poorly finished, and there's a lot of things wrong with the work that kind of done it. You could see it was done poorly, and anyone buying like the dishwasher had this much space beside it. The cabinets didn't fit and it wasn't connected and it wasn't finished. So a good flip will increase values in the property because then people with bad ones say, Well, I should get that, too. Um, but the interesting thing about this property I was looking at the camps and there was one that said it was sold for about it for 191. Said it sold for 100 60,000. Like, How can that be that low? I look at it and it said it sold in 2092. Like what? Because the agent. Oh, and of course, it was listed in 2002 but sold in 2092. Weird, because the way the come show, they'll show anything from a certain date on. Usually the way you look it up, it's, you know, from the state to present. And I guess to the 92 includes present. So this one always showed up is the lowest comp since 2002 because an agent accidentally typed in a nine instead of zero. And so for 14 years there was this comparable at 160,000. And if they didn't look into it. They thought, Oh, there was a unit that sold this year for 160,000. Don't pay too much for this unit. So I actually had my agent managed to get this speaking to head of a rear or something. Managed to get this fixed on Terra Real Estate Association or RICO related counseling here . I don't have a somewhere, and they managed to get this fixed and removed because it was a mistake. 14 years prior. So after that's removed and the slip is done now, the UN renovated ones are selling for more than I sold this Renovated your Yeah. So, actually, I do want toe kind of go on that because one great thing that you can do is create so, like a monopoly, right? There can be little kind of townhouse complexes. Um, sometimes what happens? Investors the either the original investors or maybe investors later on, purchase the whole blocks on what they do is they holdings properties because of cash flow . So then you can go in and start buying bulk, buy 10 units at a time. Ah, and then start turnover one. And that will be the model sweet, and either rent it out or whatever is that you want to do and then flip another one on. In the meantime, you're lining up buyers because you can show them. Look, this is one that's done. This is what it's gonna look like. This is what's gonna cost you Start doing there. You start creating the hype. People start realizing Wilmore, these are going to show up just like that's amazing. If you have a great agent and they know how to market, well, it's fantastic strategy. So you can do that in the townhouse that this kind of big, big player game. But maybe you know, someone who knows an investor or developer. I know what developer right now, and we're looking to get in the deal at some point, but he's buying a condo in Hamilton's 200 units. So, um, now he's got all those under contract. Now, if you flips one and sells it, guess what? What's gonna happen of values? Well, he bought them already, so that's the maximum. That's the way to maximize returns by buying one block and selling them off slowly. You can't sell em all at once. Can't list 200. That's not how that works, but it's one strategy. Again, this is a mindset thing. Be open to receiving. I'm not like mystical or whatever, but I do keep an open mind. I allow everything I talked to everybody. I allow people to give me ideas. Tell me, teach me how to invest. Because maybe I missed something I'm not doing as well as the other person Did you never know. Be open to it. And when you're open to it, the opportunities because they are everywhere all of a sudden started noticing them. Right? Because they gave you an idea where you learn the new and where you go on. And I guess just take action. Any action, anything. Make a call. Just call one person a day or go to two or three network opportunities a month or what? I just started doing something because this action it has a commute collude with the word again. Communicative. Can you look cumulative? Yeah. Thank you. Cumulative. I went to university. Everybody at it has that effect Where it kind of compounds on itself. It builds up over time. All the little things you don't notice all of a sudden reach a peak. And away you go. You got 50 deals lined up. Ask for more than you expect. This is, ah, negotiation tactic. But it's also just a broad life tactic. I mean, if you go to a restaurant, just ask for free dessert. You're at the grocery stores. Say, you know, I don't feel like paying full price for that. What can you do? Just just I mean, you're probably gonna get anything, but who cares? That's not the point. Developed a habit to be comfortable with it. So when it goes to ah ah, deal. You're asking for every goddamn thing those tires piled up in the garage. Come. You have those. That's okay, all right. You don't need him, But just just ask for everything. You never know when something could be valuable or the kind of effect that hasn't someone else, right. I mean, maybe maybe they begin to feel Oh, now this person has for too much, and then they want to ask something from you that you're willing to give up, and they feel like they're winning, right? So they then you got him, right? Um, try anything and everything. Asked How can I? This is so important. I don't wanna get into it. But I did have an example of Ah, piece of land that was unsellable. And I sold it because I tried different stuff. It was basically uncharted territory. No one's ever done it. I did it. Um, but it was just because rather than giving up on it, I just thought, How can there has to be a way I could figure this out? Um, that's just kind of a broad thing you want. Apply to everything. Stop saying I can't. I got a $7000 property. I got 20,000 bucks. I can't do the deal. Find out how you can do it. Talk to someone who is doing it. Uh, 10 extra goals. This is again asked for more than you expect. When you reverse engineering, start with a 1,000,000 bucks. Are you gonna make a 1,000,000 bucks in here? I don't know. Probably not. But maybe you could I don't know, um, 10 exit, because if you don't make a 1,000,