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40K FLIPS MODULE 5

VIDEO TRANSCRIPTION

THE FOLLOWING MODULE IS PART FIVE OF FOURTEEN OF THE $40K FLIPS SUCCESS. WE HAVE BEEN BUYING AND FLIPPING REAL ESTATE, BRINGING IN A NET PROFIT OF $40,000 ON EACH HOME FOR YEARS. THE GOAL OF THIS CLASS IS TO TEACH YOU HOW TO MAKE MONEY FROM BUYING AND FLIPPING REAL ESTATE, TAKING YOU ON THE PATH OF FINANCIAL FREEDOM SO THAT YOU CAN ENJOY THE PROFIT, GROWTH AND WEALTH THAT YOU DESERVE.

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Article I. Introduction

JOSH: Okay guys so we’re officially recording and we are live right now and we are with 40K

Flips Coaching module #5, getting your $40,000 flips, finding your properties, making offers

with zero marketing budget and my guest for this class is my big brother Mark Cantwell. Mark,

how’re you doing today dude?

MARK: I’m doing great, how are you guys?

JOSH: OH, I’m great. I think the people are great. They’re always excited, it’s been a fun class,

this is our fifth session so far and we’re going to have seven more to go after this one. So a lot of

great, really great teaching going on. So guys we’re going to jump in right away with how we

find properties, the different resources that we use, how we evaluate properties and how we

make our offers and what we offer. We have a couple case studies to go through. My brother and

I, we do a lot of work together but that always wasn’t the case. For a long time, I had my own

investment business, Mark had his own investment business and we were doing things very, very

separate and then over the last year and a half, we started to do a lot of things together but still do

some things separate. He does some houses on his own; I do some houses on my own. So you’re

going to hear, really today, from two different angles when it comes to finding foreclosures,

which is primarily what we buy and invest in. Although we’ve done some short sales, we’ve

done some from sale by owners, in our area, there’s a lot of foreclosures, so we’ll make an offer

on foreclosures all the time, including HUD Homes, Fannie Mae, Freddy Mac properties and

short sales. I want you guys to hear from both angles because I own a brokerage and I have a

number of real estate agents that work for me and I have access to the MLS and for the most

part, my real estate agents will do a lot of the work for me as far as looking for homes. For my

brother Mark, it’s really the exact opposite and so, what I want you guys to hear and listen to

today is really two totally different methods for evaluating properties, finding properties and

making offers. They’re not totally different, but some of you guys will say, hey Josh, you know,

I don’t have access to the MLS, well that’s one of the reasons why my brother and I are a great

team is because, you know, he’s able to find properties consistently and he does not have access

to the MLS either. But we do have, you know, our partnership together and Rob Russell is one of

my real estate agents that works for Mark and I and Rob is a great third party resource to also

give you his opinion as well of, you know, making offers, what houses might need for work and

what houses might resell for. Ultimately, Mark and I make the decisions, we want Rob’s

feedback, but often we ignore what Rob says too. So, Rob’s a great guy, but look, at the end of

the day, it’s your money, it’s your deal, and so you need to be educated on how to make the

decision. You certainly want to gather as much intelligence and as much data and resources as

possible and for us, you know, we use a lot of different resources, and, of course, we use Rob as

well. We use Rob’s opinion, what Rob thinks we should offer, what Rob thinks the house might

sell for, but often, we of course, make the final decision on what we think is going to work. So

you’re going to hear exactly today, really three or four things. One, what we do on a daily and a

weekly basis to search for properties. Number 2, the criteria that we use to set up these searches.

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Number 3, the resources that we use to do research, to look at homes. Of course, the MLS is one

resource but there’s a ton of resources outside of that. How we run and do a CMA, a Current

Market Analysis of the property and then our step by step process for how we, you know, make

an offer and what we’re willing to offer and how that works. So we have some case studies for

you. And finally, how we accept a bid, how many bids we make before we’re actually able to

buy a property and get an offer accepted and also how we handle earnest money. So we’re going

to talk specifically about finding deals. Before I get too far along, I just want to introduce my

brother, so Mark and I have been buying and selling real estate since 2004. Mark is a former

teacher who started doing some rehab work for me in the summer times and then quickly decided

that he was not going to go back in to teach and decided to get away from teaching full time and

since then, Mark’s been involved in real estate full time for almost 8 years now. He’s bought and

sold dozens and dozens of homes and from the very, very beginning, Mark has focused almost

exclusively on big profit deals. Not doing, you know, $5,000 wholesale deals or $10,000 or

$20,000 fix and flips, but $30,000 and $40,000 and $50,000 profits and so, Mark and I for the

past 18 months or so have created a very cool partnership where I primarily look for capital,

raising capital. I’m also systemizing our business constantly. I’ve introduced the property launch

formula to our business and I’ve also introduced Rob to our business. Mark, my brother’s

primary focus is on finding deals and lining up the contractors and outsourcing the

improvements. So, Mark let’s just step back real quick and tell everybody why did you kind of

focus on the, you know, buy low, improve and sell model. Why was that your primary focus and

why have you just been focused on the big deals instead of a bunch of little ones?

MARK :I think that was the best fit for my personality as far as my artistic stance on

personality, you know I like to get in there and I’m not much into numbers and computer stuff

and all that, I like to get my hands dirty and be creative, so rehabs were kind of my niche. Like

you said, we worked on some wholesaling quick flips. On a good year or two doing that when

we first started, it was fun, but it was definitely a lot more office work.

JOSH: A desk job.

MARK: Yup, exactly. That’s how it felt at times. We definitely went out in deals, went out

looked at short sales, you know, got involved with the homeowners and you know that was

always interesting and fun at the point. But rehabbing became more of a hands on, you know,

you find a property in the beginning with potential, you see the product and if you do it right,

you can make big bucks doing it.

JOSH: That’s great. That’s great man. So, you know I’ve always been curious about that one

summer when you decided that you weren’t going to go back to teaching. It’s not like you had

any kind of guaranteed income coming in and, you know, you basically said, look, I spent the

time to get a degree. What was kind of going through your mind, what was kind of going through

your head, that summer when you were really thinking, I’m going to quit my job and do real

estate full time all the time. What were your thoughts going through that? The reason why I ask

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Mark is because there’s obviously a lot of folks on the line who maybe never did a deal or just

doing their first couple deals and their doing that balancing act between having a full time job,

it’s guaranteed income, although maybe it’s not the income they want, it’s reliable and you were

in that same boat. You know, and I was in that same boat too in 2003, so what was going through

your mind in that summer when you were thinking like, okay I’m done with teaching, I’m doing

this full time.

MARK :I think we, me and you been talking for a good 6 months or maybe a year about what

you were doing and you kept giving me more information, I don’t know if I was asking questions

or if you were just telling me all this things were given to you, it just seemed interesting and I

think most people, you know, the idea of real estate, I think that’s a great, people love the idea,

probably 9/10 people you talk to would love to get into real estate somehow. So when you got

into it, you were excited about it, you had a lot of ideas, a lot of information and, like you said, I

was doing the hands on, some painting, some rehabbing for you in the summers and I think it just

became one of those things that just came at the right time, at the end of the school year, May of

2005 where it just seemed like, let’s do it. We had business partners that we got along with well

and we had you as backing and we figured let’s just give it a shot and I think we all jumped into

it mostly because of watching you we had the backing of you and all the information that you

already had. I think it does get scary at any point, but it’s especially scary if you don’t have the

right information and the right coaching and the right people to go to. But I think we knew we

had that backing, so it was worth a shot.

JOSH: Yeah. Yeah, that’s important man. You know I had that same kind of backing too when I

started, I signed up for coaching programs and I bought products and I got my education and I

felt comfortable, you know, leaving the financial services business. So that’s part of it, so I guess

the reason why I wanted to bring this up was because for all of you guys that are online right

now and everybody who’s ever going to listen to this recording, you know, the decision making

process for Mark and I is really no different than it is for all of you. You know, we both had

other jobs, we both had a pretty stable jobs, Mark was married already at the time, and I was

leaving a successful financial planning career. Mark was very happy as an art teacher, but it was

unfulfilling and we wanted something new, so we took the same kind of risk that you guys are

taking now thinking I want to get into real estate, right? And I want to do this and I want to flip

houses and I want to make money and I didn’t have any, you know, no guarantee of income

when I started, even for Mark, you know, Mark had me to kind of show him the way a little bit

but, I wasn’t backing Mark, I wasn’t paying his bills, I was guaranteeing him that I was going to,

you know, pay him x amount of dollars. Mark was running his own business. He was responsible

for, you know, Mark got an office, he got desks, he got computers, and the whole 9 yards and so,

I guess the point I’m trying to make is, guys, you either just jump in and go or you sit on the

sidelines forever. You either just jump in and do it and do your first deal and every time it’s

going to feel a little bit awkward, it’s going to feel a little bit scary. It’s supposed to. You know,

when you were on the diving board when you were probably 8 years old and you were on the

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high dive for the first time, that was a little bit scary right because you’re not sure if when you

jump off, you’re going to be able to swim back to the top or if you might do a belly flop. Mark,

remember when we were in Medina and we used to jump off the high dive and belly flop when

we were like 10 years old.

MARK :{ Talking over each other-12:10-12:12}

JOSH: So being in real estate is almost a rite of passage. It’s almost supposed to be a little bit

scary. But that shouldn’t stop you is my point doing your first deals. Mark blew through that in

his first bunch of deals been doing it now for 8 years. And we’ve created a nice fun business out

of it. So, guys let’s jump in right now and talk about finding deals. My brother finds lots of deals,

we bought a house Friday on Stead Drive, we bought a house two weeks ago on Edgewood, we

bought two houses about sixty days ago which was Homestead and Gardner, we’ve made offers

on Pawnee, we’ve made offers on Chippewa, we’ve made a bunch of other offers. Mark just

came to me today and said he’s got two more deals that he’s trying to close and buy and so guys,

we do this all the time, every day, look for properties. So what we’re going to talk to you about is

5 or 6 different strategies that we use to find deals. So Mark, let’s jump in with you because in

our business, for the most part, you’re really kind of looking for houses every day and you’re

primarily the guy who’s out looking for deals primarily because we’re trying to do all the work

and all the deals kind of by where you live because that’s where your crews are at, that’s where

the contractors are at, it’s just kind of a shorter drive, right, and it’s pretty consistent and reliable.

So let’s just start with your search. Tell me, just when you want to search for a property or every

day, you’re getting home from the field, what do you do? What’s your, just tell us what it’s like

when you sit down in front of your computer, what do you do when you search for homes daily

and weekly?

MARK: I have found over the years certain websites that I feel comfortable with and there’s

always different websites popping up that you can try out. But I’ve gotten real comfortable with

zillow.com which is very common for people to use, zillow.com. I have Howard Hannah a

couple of real estate out here is bigger. The way I’ve found the one’s I liked is by trial and error.

Every real estate website’s different. Some have the map search where you get like a bird’s eye

view and look around, some you can just punch in your cities and search that way. I got a hand

full, mostly Zillow because they do have a lot of features on there, they have the area, like I said,

bird’s eye view, you have past sales of not just the properties you’re looking at but the ones

around it. You can do, you can find out the schools, what’s in the area, what school district the

house is in. So Zillow has a lot of information, like me and you talked before, no website’s

perfect but Zillow will give you a lot of information and if you start there, I have a search

criteria, I have an account on Zillow, say you’re searching, you have a group of cities, you know,

whatever 10, 20, 30 cities in the area that you like, put in there, put your max price, put in the

square footage, put in bedrooms, bathrooms, all kinds of different information. You know, key

words, you can put in something with a lake view; you know any kind of small things you want

to add in there. But, I say search very basic, I say, search in our area, usually up to $70,000-

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80,000, I look for something, you know, at least around 1,000 square feet, have at least 2

bedrooms, usually 3, you know, like we talked earlier, I’ll only look at 2 bedrooms, if they have

the square footage that you can turn it from a 2 to a 3. I don’t want to buy a 2 bedroom unless

I’m definitely going to turn it into a 3 bedroom. Because like, a 2 bedroom is too tough to sell in

our area. So, if I have 20-30 cities, it’s usually up to about $70,000-80,000, has square footage

and I go in there and punch the buttons and see what comes up and just keep a log of what I call

my favorite homes, so I probably have 50-100 homes that I’ll save and after that, I just start

sending them to our agent Rob and he starts pulling quotes for me and that stuff.

JOSH: Yup, yeah so guys let’s dig in with Zillow a little bit. Some of you guys might laugh, but

you guys that are more experienced will say that Zillow, come on, but guys listen, for a lot of

you who have maybe never bought a house, and also don’t have access to the MLS, you need to

take Zillow very seriously. My brother Mark has no access to the MLS, and also Mark set up

with Seth, a former real estate agent, that he used to work with, Seth set up a search criteria for

him in the MLS. So there’s two things that you need to do. So this is part of your homework

when we get off of this call. One is, set up a search inside of the MLS and so, for us, I have about

a dozen real estate agents that work for Sharp Concepts Realty and I decided that we were going

to work with Rob because Rob lived primarily in the area that Mark was buying homes in for us.

So Rob can go in and set up a search in the MLS and set up basically a trip canopy that can feed

Mark and me properties every day that fit our criteria. So homework number 1 is you need to

find out and search for an agent that can set you up with an MLS search in the cities that you

want. And so, for us, if we look at Zillow real quick, I’m going to put in, Mark give me a zip

code like Macedonia or Northfield or Norton. 44 what

MARK: Norton is 44203.

JOSH: So when you go into Zillow real quick, I’m going to show you this two ways. One is in

Zillow and one is in the MLS is to set up searches. Basically it’s done the same way. So when

you log into Zillow and you first use Zillow, you’re going to want to create an account, that’s

step #1, meaning, you’re going to sign up with your first name, last name, your e-mail, they’ll

probably ask you your phone, maybe your physical address, they’re going to want you to create

an account at Zillow. Then when you do, you click on homes up here in the upper left, you can

then start to add in some specific cities that you want, like 44203, 44256, Mark give me some

more.

MARK: 44319, I don’t know a lot off hand, 44256.

JOSH: 44216 is New Brunswick. 44149.

MARK: 44221 is Cuyahoga Falls.

JOSH: 44221 okay. So we do that and you’re going to go ahead and fill out a price point, so the

price that we put in, you know, you can do zero as a minimum, but a lot of times if you do, you

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now, zero to $20,000 homes, you’re really talking about some serious Junkers, even for us. For

us, maybe $30,000-80,000, 2 beds +, 1 bath +, minimum of 900 square feet, lot size we don’t

really care less about. Mark, how about year built, do you ever search by year built? Or you

don’t really care about that.

MARK :No, I think when you get something around our area, before the 1900s is tough but

Cuyahoga Falls is full of houses that are 1908-1919, those are just beautiful old houses, so I

don’t worry about the year built.

JOSH: Yeah. Yeah, I don’t either. And so, now, we’re going to check these boxes over here in

Zillow, right, so you’re going to check the for sale box, by agent, by owner, new homes and

foreclosures. You know, this pre-market area is, to me, is nice to see but unreliable. And then,

recently sold is great to check off as well, we’re always looking for single family homes and you

can also include pending listings, now notice when I click the recently sold, notice all the

yellows that pop up on the screen. So that can make the search a little bit annoying because, for

me, it adds in all the homes for sale plus all the solds. So to make this really basic, what I’m

going to do guys, is I’m going to eliminate the recently sold and I’m going to eliminate the

foreclosures and I’m also going to eliminate the pre-market properties. So I’m only going to

want stuff that’s for sale by agent and by owner, that’s it. $30,000-80,000, 2 beds +, 1 bath+, 900

square feet + and then click apply. And now what this is going to bring up for us is the map of

everything that fits in our criteria. And you can see this area here that’s on your screen right now,

it’s on your screen right now, this is the let me see, this is the Cuyahoga Falls area. So this is

44221right?

MARK: Right.

JOSH: 44221. Okay. So now you have all these properties Mark that are on here between

$30,000-80,000 that have come up in Zillow and you set up this search, right and you save, you

can save this search, so it pops up and you can reopen it every day. So tell me, Mark, what do

you do from here? After the search pops up and you’re looking at these houses?

MARK :I just start clicking on the picture, I don’t have same that you have, I have the mind

map, but I don’t have Zillow pulled up, but once I’m on Zillow and I’m looking at the price

range, I know, you know, my price range, I start clicking on houses, you know, as we talked

about the other day, you definitely want curb appeal, so if you pick out, you know, a picture

comes up and you can just tell from the front and from the picture, that it’s been added on like 10

times or it was a small little shack and they tried to fix it up, you know, pictures will tell you a

lot. You definitely want something that you have a good feeling for so you want to look at as

many pictures as possible and, if it looks like it has some potential, then I look down the

information after I pick the house and it gives you the price history, where it’s at, if it’s dropped

recently, if it sold 5 years ago for $130,000, it gives you all that, it gives you schools. You know,

I just have to go through and you, you know, if it’s at the max of up to $70,000-80,000, it’s at

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$70,000, but it looks pretty rough, you know, I’m not going to be that much interested in it

because if it’s rough, it should be cheaper, you know, I really try to narrow down, there’s 20 in

this area, what 8 or 10 look the most interesting. I just kind of analyze each house a little bit,

square footage, beds, baths, if it comes up as a 2 bedroom, 1 bath, like we talked about those are

tough, unless it has enough square footage to expand it into a three bedroom. Do as much

research to find out as much information as you can on that page on Zillow and just go from

there.

JOSH:Yeah. Gotcha. We have a process here, very, that we’ve already kind of mapped out and

I’m going to walk you through this exact process, so Mark and I we’re just taking our system

that we use and writing down some very specific notes for all of you guys and so, like, houses

for sale, 44221, between $30,000-80,000, and again guys, you might think like, wow, it’s really

cheap in Cleveland, well guys, it is cheap in Cleveland. So don’t think, like oh Josh and Mark

you can do this business because houses are cheap in Cleveland, like look, if you live in Chicago,

or you live in L.A., or you live in San Francisco, you’re probably just going to double these

numbers or triple these numbers or quadruple those numbers. The math is going to be the same,

the percentages are going to stay the same, it’s just a matter of the percentage. Your area is

probably more expensive than ours and so your profit potential is also much, much higher than

ours. We have to do more, we have to buy houses for less to make the $30,000, $40,000, $50,000

that we make, whereas for you guys, you probably make a lot more money than we do on each

and every house that you do. So, the step by step process that we’re going to, I’m going to walk

through this, Mark, first and then we’ll go back and actually show them sort of how we did it.

Step Number 1 was basically to set up your search with really, and two cites, Zillow on your

own, through Zillow drip and then MLS with an agent through the MLS drip. And again, just to

go through our criteria is basically $80,000 and under, Mark has specific cities and zip codes that

he programs in, you can do that on Zillow, you can do that on the MLS, 900 square feet or

above, we want all the 2 bedrooms, we really want 3 bedrooms but we just bought a house two

weeks ago that we’re converting from a 2 bedroom to a 3 bed and at least 1 bath. And so that’s

our search. So I’m going to copy this and move this over to step number 1, okay, so that’s our

search. Now in addition, you could check out websites like homesteps.com, homepath.com, and

hudhomestore.com. Now homesteps.com and homepath.com are the Fannie Mae and Freddie

Mack websites. And what those are, those are dedicated sites set up by Fannie and Freddie just to

list their inventory only. And here’s the thing, anything you find on homesteps.com which is the

Freddie Mack site, and anything you find on homepath.com, which is the Fannie Mae site,

you’re going to find in the MLS and you’re probably going to find on Zillow. Also the

Hudhomestore.com are our HUD homes. Those are also going to be in the MLS and also on

Zillow. So it’s great to start with Zillow and the MLS, just those two and also use HomeSteps,

HomePath and hudhomestore as an additional resource. Mark, I would say at least 80% of the

homes that we’ve bought in the last two years have been either Fannie Mae, Freddie Mack or

HUD.

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MARK :Right. Yup.

JOSH:Right. And the other 20% are some short sales, and maybe other bank owned properties

that are not Fannie Mae or Freddie Mack or HUD. Right.

MARK :Right.

JOSH: These are the resources that we use guys and I promised you when I told you we were

going to deliver this coaching, we’re just going to tell you what we do. I’m not going to blow

smoke up your skirt and try to make things up. I’m just going to tell you what we do. So step

number 1 is to set up the search. MLS with an agent, Zillow on your own, our criteria again is

$80,000 and under, 20-30 cities that we like, primarily in the southeast and south Cleveland

suburbs, 900 square feet and above, 2 bedroom and above, 2 beds that we’re going to convert to

a 3, and 1 bath. Step 2 that my brother said was you’re going to look at the pictures, right. And

so this is interesting because the National Association of Realtors says what, you guys know, I

want to ask everybody on this class, what percentage of homes, I’m sorry, what percentage of

buyers start their search online before they talk to a real estate agent, before they get pre-

approved, what percentage of home buyers start their search online? So tell me guys what you

think, what percentage is it 20%, 40% is it 60%, is it 95%, is it 58%? Okay, so you guys are

getting close. Liz Nichols says 85%, Jeff says 80%, Lynn says 80%, Patrick says, you mean it’s

not all? Dan says 80%, everybody’s saying 80%. Gloria says 75%, Patty says 95%, Dean and

Laura says 90%. Okay guys, the number is 92%. 92% of homebuyers, whether they be investors

or retail buyers, start their search online. So we’re doing exactly what the National Association

of Realtors is tracking. They’re tracking investors like us and buyers like you, and saying hey,

these guys are searching online. So they’re trying to give us these tools like Zillow, HomePath,

hudhomestore, auction.com, hubzoo.com. They’re giving us all these resources so that we can

search online and look for homes. So that’s what we do, my brother said look, look at curb

appeal. So curb appeal, right, so you find these homes, step 1. Step 2 all Mark’s doing is clicking

on each of these little red dots and then he’s opening up the pictures, right Mark?.

MARK :Right. Yup.

JOSH: And then he’s looking at the pictures of each house. And you can tell pretty quickly a

house that needs work and a house that doesn’t. Right. And for us, typically, the more work the

better. We want good bones on a house, we want a house that has really good, you know,

kitchen, bathroom, stuff like that, but, we want stuff that’s going to need work because the more

work, the better. So like this little house in Hudson, so one car garage, 2 bed, no, I’m sorry, it’s a

4 bed, 2 bath. Alright, but you can see, this property, look at the pictures warning. This is

obviously a foreclosure. But looks like it’s got good bones on the inside, kitchen doesn’t look too

bad, fireplace. Here’s the basement with, looks like some cabinets in the basement or maybe the

garage, okay, that looks like the basement just because of where the window is at. Looks like a

little bonus room. Now guys, here’s a really good indicator of some things that my brother

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already mentioned and he said it so fast, you might not have even caught it. He said the next

thing he does is while he’s looking at the pictures, he starts to look at comps. So step 3 is comps,

he starting to take a quick look, like what’s been sold around it. Zillow is not perfect but it’s a

good place. So look at the recently sold and look at values from the sold in the areas and

compare them to the subject property. Step number 4 as my brother mentioned, look at the price

history. Now notice right here on Zillow, this property is pending for $62,000 and it last sold on

November 2003 for $121,000. It’s a 4 bed, 2 bath and it’s 1,200 square feet. So Mark if you saw

this property, what would be your initial reaction? Is this one that you would probably put on

your saved list?

MARK :Can you read it off for me again? Again, I don’t have the screen in front of me.

JOSH:Yeah, no problem. The pending is $62,000, it was for sale and now it says pending. Let’s

just assume it was still for sale at $62,000, the last sold was November 2003 for $121,000, it’s a

4 bed, 2 bath and it’s 1,238 square feet, it was built in 1951.

MARK :Yup, definitely .

JOSH: So if it sold in 2003 for $121,000, even with the mortgage crisis, with everything going

up in value and down in value, we can assume, 10 years later, that this property is probably

worth at least still $121,000. And if this thing was for sale, for let’s say, $65,000, we can

reasonably make an offer on this property for much less. It doesn’t mean the bank’s going to take

it, but we can make an offer for less. Okay, so that’s a good indicator. Now you’re going to look

down the description, right and you’re going to see things like, anytime you see in the

description, you see these words, equal opportunity housing, you’re always going to know when

you see equal opportunity housing that it’s most likely going to be a foreclosure. Because a

normal homeowner doesn’t put in their description , equal opportunity housing. Also, you’re

going to see things in the description, sold as is. Those kinds of things, you’re going to know

right away, probably a foreclosure. Alright, now with Zillow you can see back, the property

values of this home and you can see back 2003, $120,000, 2007, 2009 prices start to go down a

little bit and then they drop off here at the end. Okay again, Zillow’s not perfect but this gives us

a pretty good indicator that we’re going to want to go see that house. You notice it was listed for

sale on 3/22, for $69,000 and it just went pending on 5/21, so the property was on the market for

60 days. And that was actually listed through Cutler, so this is a property that Mark might have

also seen on one of his favorite websites, which is Cutler.com. Now guys, you can also see just

from the map view right Mark, you look at this map view to see what else is for sale in the area

to get some basic ideas.

MARK :Yeah, like you were saying when you first look, you don’t want to get overwhelmed

with all the little pictures, so I definitely start with for sale and then I bring back in what’s also

sold, you get a really good idea of you know, what’s in the area.

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JOSH: So guys, when you’re here and you’re looking at this house, right the subject property

right there, right 2958 Hudson, right, the only thing that we might be a little bit apprehensive

about is this property is on a corner lot. So you got Hudson Drive, and looks like Marguerite

Avenue here, but the initial reaction is that this is a property that we need to go see, okay. We

know it’s a foreclosure, we know it was for sale for $69,000, we know the area, there’s a lot of

homes that are going to sell in the area for probably in the $115,000-120,000 range. This is a

little two bed that sold for $72,000, so that’s a pretty good property that we then want to put onto

our save search. And what we’re going to do then is we’re going to set up time to go with our

real estate agent Rob and go look at 6-10-12 homes in one day. So guys if you wanted to save

this home, you just click save this home and it’s going to put that home on your criteria. So we

like that one. So let’s go back to our search and offer system. So again, this is assuming that you

do not have access to the MLS. Do not have access to the MLS. Okay, here’s a good question,

Jeff Dimock just sent in a comment, that says how do you get $115,000-120,000 range for that

house in Hudson that was for $62,000 with these others around it having sold for $70,000-

80,000. Okay Jeff, so here’s a good point about Zillow. Zillow is not perfect when it comes to

comps, matter of fact, Zillow can be fairly off when it comes to comps. And so, when I see these

other homes that we just looked at, and I saw those other properties and I’m looking at those and

they say, the ones in the area are $70,000-80,000, well Mark, tell me about Cuyahoga Falls, you

know Cuyahoga Falls pretty well. What do houses typically sell for in Cuyahoga Falls after

they’re rehabbed?

MARK :Anywhere from $115,000-160,000.

JOSH:Yeah. So Jeff, great observation on your part. You’re like, okay, well I see this property

in Cuyahoga Falls that was pending for $62,000 and then you’re looking at the house and you’re

looking down here at the chart for Zillow and Zillow is showing these properties, you know, are

only worth $70,000 right on this, or $80,000. Well this is Zillow making its best guess based off

of other sold properties and other pending properties. Well, guys this is going to take into

account all the foreclosures that are out there for sale. So this is why we’re taking a look at

something and saying look, we know that this is a foreclosure, we know that it’s got bones, we

know it’s got good pictures and it’s got curb appeal, 4 bed, 2 bath. We know that it was listed for

$69,000, we know that it is now pending for $62,000 but we also know that it sold 10 years ago

before the run up of the market, before the foreclosure bubble started, you know, it sold in 2003

for $121,000. So it’s reasonable to think and because we know the area, it’s reasonable for us to

know, like Mark said, it’s going to resale for between $115,000-160,000 once it’s in perfect

condition. Okay Jeff. So Jeff for us, that’s where you cannot trust Zillow necessarily to give you

a resale price. Zillow’s a great resource for looking up home values and looking up properties

and trying to find foreclosures but it’s not great when it comes to giving you after repaired value

or your resale price. It’s great for research when it comes to finding deals but I would never rely

on Zillow to tell me what I’m going to be able to resell a home for. Mark how do you feel about

that?

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MARK :Yeah, no I agree 100%. The only thing that I don’t kind of brush off is their guess on

what the estimate would be in for sale and the past sales can give you a more concrete at what

the market’s going to give you.

JOSH:Yeah. Yup and I’m going to show you guys a property that Mark and I made a bid on

over the weekend and how we arrived at our price and exactly how it works. Guys here’s another

property that just pulled up at 1952 Victoria Street in Cuyahoga Falls. This is pending for

$48,000, and this last sold September, 2007 for $105,000. This is a HUD home. If you just look

at the description. 4 bedroom, cape in Cuyahoga Falls, featuring a large sunroom, needs a little

bit of TLC, property is HUD owned and being sold as is. So that’s good, what else do we know.

Well we know that it was offered for just $48,000, actually we can look right here, it was

actually originally listed for sale for $48,000, on 4/16 and somebody made basically a full price

offer, it’s got a pending sale for $48,000, and it was foreclosed on the lender on 1/23/13 for

$54,000 but it sold in 2007 for $105,000. Now obviously in 2007, that’s the height of the

foreclosure bubble, the height. The real financial crisis started September 2008 with the

bankruptcy of Lemon Brothers. This is a potentially good deal, we would put this on our saved

search list. The only thing that would be small for this is it’s only 960 square feet. We might put

that on our saved search list and when we go out on our Cuyahoga Falls, we’re going to go look

at that. Let’s look at, see if we can find one that’s got a little bit bigger square footage. Cuyahoga

Falls has a lot of like 1,000 square foot homes, huh Mark?

MARK :Yup. Yeah, there’s a couple different sections. There’s a section of big colonials, old

colonials, pretty colonials, there’s a section of slab, Cape Cods that are about 1,000 square feet,

newer homes, there’s certain pockets.

JOSH:Yup. Gotcha. So guys here’s another one that we’re looking at in Cuyahoga Falls 707

Falls Avenue, Cuyahoga Falls, Ohio 44221. So it’s for sale for $72,900, it was listed with Cutler,

Mark.

MARK :We made an offer on that one.

JOSH:Yup.

MARK :Yup, we made an offer on that one probably a month or a month and a half ago. That’s

a perfect example of you know where you want to make an offer and if they don’t budge, then

you walk away. I think we offered $62,000 on it and the agent basically came back and told Rob,

that he didn’t know the market and got a little personal, but you know, Rob, like most agents,

you can’t take it personal, you got to make your offer, know what you’re willing to pay and if

they’re not willing to budge, you walk away.

JOSH:Yeah.

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MARK :We went $62,000 and I was willing to go up to maybe $65,000 but that was a little

uncomfortable with the way they reacted and it sounded like they wanted something a little

closer to asking and we weren’t going there.

JOSH:Yeah. So maybe it’s time to go back, who knows, because looks like it’s on the market

now $72,900, now it’s a 3 bed, 2 bath, 1,500 square feet, so that’s a little bit bigger, which is

great. This is a for sale by owner guys, notice how it says great bones that needs some TLC, 2

car garage, 12 month home warranty for the buyer. Well 12 month home warranty, bank owned

properties, HUD homes, REO’s, Fannie Mae and Freddie Mack, they don’t offer home

warranties to buyers. So we know that little indicator right there, is that this is a for sale by

owner so you’re probably going to have a homeowner who’s maybe a little bit tighter on their

price. This was listed for sale on 11/29/12 for $79,900 with Cutler and it was price changed on

2/14, well now it’s late May so they’ve been on the market now 171 days, almost 6 months and

so, you know, they might be a little bit more motivated. Now guys, look down at here at this

map, again here’s our subject property, 707 Falls, this is also on a corner lot, 7th

Street and Falls

Avenue, but you can see some of these comps here. Here we got a house that’s, Mark, $87,000

and a house right next door Zillow has marked for $136,000. So Zillow has over $50,000

difference in homes that are right next to each other. So, that just doesn’t make a whole lot of

sense guys, you get to know, opportunities with Zillow but after repaired values, you have to

work with a real estate agent who can give you a full market analysis and show you what’s been

sold. Mark and I work a lot with Zillow and with homestead and HomePath and Hudhomestore

and MLS to find deals. But when it comes to sale price, it’s almost always based off of a market

analysis from a real estate agent and also our own comps that we run and pull and what we drive

past and see what else is for sale. But you cannot rely on Zillow for resale, but you can definitely

rely on Zillow to find opportunity . So we want to be very clear about that. So guys, let’s move

on to the next step. So step 4 is price history. This is something that we can get from multiple

locations. You can get that from Zillow. You can get this from the MLS and you can get this

from a title company for free. And so step number 4, title companies and closing attorneys will

provide you some resources for free in order to earn your closing business. So I have an agent,

her name is Mary Jo, it’s actually my sister-in-law, she doesn’t run her own CMA’s. She actually

uses a title company to pull her CMA’s for her. I don’t know if it’s just because she’s lazy or,

you know, I don’t know what her deal is, but anytime she needs a CMA, she asks her title

company to pull it for her. And she’s a real estate agent. So title companies pull CMAs for you

for free. Now a CMA is a Current Market Analysis and what that typically includes is three sold,

three pendings and three actives. And when I was with Rob this weekend, Rob and I were just

looking at the sold, just the sold only. Because the pendings and actives can be misleading.

Because the actives, you have some homeowner who wants to get full price and they’re priced

out of the market. So those actives are not real, they’re not realistic. You want to look at

primarily just the sold if you have enough of them. If you don’t have enough sold, you can look

at the pendings and the actives. So Mark I have on the screen on the mind map, Ballash Road

and this is basically sort of an example of step 4. Looking at the price history of the subject

14 | P a g e

property. And so we looked at Ballash Road, Ballash Road was originally listed for $79,900 and

was a HUD home. And we were able to buy it for $52,000. But what did we know? We know it

sold in 2000 and we know it was listed in 2010, so when we found this property, I told you about

it, we went out and saw it, we made an offer, what was your initial reaction when you looked at

the price history?

MARK :I think we knew it was a good deal. I think the past sale was $137,000 and we saw that

it was on the market for like $150,000 or so within the last 5 years. We definitely knew it was a

potential deal.

JOSH:Yeah. So that’s exactly what, you’re looking at price history right. You look at stuff that’s

sold. Now obviously it was listed in 2010 for $169,900 and let me tell you why. The reason why

is because it was a short sale. The homeowner was in pre-foreclosure and the listing agent was

trying to get the most possible offer to cover the mortgages. The highest possible offer to cover

the mortgages. So $169,900 is not a realistic price. But we knew that they had asked that and so

it’s going to be somewhere in the neighborhood, probably slightly less than that. So we looked at

the listing history, so the great thing about looking at listing history of a property especially in

the MLS, is not only can you look at transfer history, but you want to look at listing history. Now

why is listing history important? Well listing history is because a property could be listed with

one agent and for 6 months and then not sold and then listed with another agent for 6 months and

then not sold and then listed with another agent and then sold and you could tell how long the

days on market were. How long were the days on market to sell that property. So listing history

and all the realtors, let’s just call it DOM, days on market. Days on market means how long in

one specific city or one specific area is it going to take for the average home to sell? Northeast

Ohio, the average days on market is 127 days. So when a house goes on the market here, it sells

in an average of 4 months. Now some of you guys in, like I said, Arizona, Florida, Chicago, San

Francisco, maybe Vegas, maybe for you they have more expensive homes, you may have less

inventory but when you find one, you’re not going to have to worry about 127 days to sell it like

I do. If you acquire right and you do the improvements right, you’re going to sell it super-fast. So

that’s the advantage that you have over us. So I don’t’ want to hear you bitch and complain, ahh,

there’s no inventory. Or oh, I have more expensive houses. You know, there’s no inventory, yet

more expensive houses and when you get a good deal, your house is selling in a week. You’re

houses sell in two weeks. Mine take 4 months to sell. So you have some advantages and then you

have some disadvantages. Okay Mark, so then step 5 is to go look at the property with a real

estate agent. So tell me, when you’re out in the car, right and you’re going look at houses, tell us

about your week. Tell us about your day and how you like to go out and kind of just set aside

either all of the day or part of the day and just go look at a bunch of houses in one day.

MARK : Yeah, I usually plan like a half a day, you could spend a good hour at least, looking at

one house, you know, driving through the neighborhood, looking at comps or sold properties, for

sale properties, you know, talk to the neighbors, getting as much information as you can on one

house. It may take you an hour or two. You know around us, I look within 45 minutes within my

15 | P a g e

house, because I’m pretty central, so I may only make it to 3 houses in a couple hours. So it’s

really based on how many houses you’re looking at. That’s to plan at least 4 hours, not a full day.

I go out and look. When I’m real serious about getting one or two, I’m out looking every day or

every other day because, like we’ve talked about, I look at 10-20 properties before I even really,

we start making offers. So I need to look at a lot because you’re going to see a lot of junk out

there, you have to see things that you look good on the internet, you get in there and they have

low ceilings, they have bad floor, they have foundation issues that weren’t in the picture, that

weren’t disclosed. At least an hour or so on each property. And some you walk right in, you

know, and you walk right back out and you’re in and out in 10 minutes. So you definitely want

to keep, you have your phone, you have your computer with you because you’re going to get

interested in a property and you want some quick answers. So you get on your internet and you

get on Zillow on your phone or whatever website you want and you call your realtor and try to

get as much information as you can when you’re out and about looking at the properties.

JOSH: Yup. Absolutely So Mark I’m going to ask you a question about those disqualifiers in a

minute like low ceilings, bad floors, foundation problems, those kinds of things we’ll go through,

kind of pick your brain on what you think disqualifiers are and I’ll definitely add mine as well.

So guys look, step 5, when you’re out at the properties looking at them with the real estate agent,

you want to use your real estate agent as a resource. They’re going to get paid a commission,

they’re typically going to get paid approximately a 3% commission and their commission gets

paid for by the seller. But if a real estate agent knows that you have a cash buyer, because

remember the first four classes that we taught, the last 2 weeks, was all about raising and getting

the money. And so, when you have cash in hand and you’re ready to buy, real estate agents love

you because you’re not a financed buyer, you don’t have to get pre-qualified, you don’t have to

go FHA, you don’t need inspections, appraisals, you don’t need all those types of things. You’re

a cash buyer and so agents love to work with you so don’t be afraid, although we really like Rob,

we’re not afraid to demand a lot from Rob. Because he basically is going to make a commission

for just helping us. So we want him to help us and he, a good real estate agent is going to help

you as much as possible especially when you’re one of those guys who raises a lot of capital, like

I’ve shown you and you can buy multiple properties a year or you might buy one or two or three

homes in a month. Mark, if you close on those two properties you told me about this morning,

plus some other inventory that we’re looking at, you know that will be basically almost 6 houses

in the last 2-3 months that Rob’s getting paid on. Almost 2-3 homes a month and so do you think

Rob has invested interest to work his ass off to make sure that he’s taking care of us and getting

the research we need. Absolutely. He does. And he wants to do that. He wants to provide it. He

makes a living selling real estate and when he has a repeat customer take care of him. It’s like if

you’re a hair dresser and you have a repeat customer who comes in every month to get their hair

cut, you know, you’re going to take care of them. You’re going to talk to them, you’re going to

schmooze them a little bit. If you’re my buddy Jake, who gets Angelo’s pizza once a week. If

you’re Angelo’s pizza, you send him a Christmas Card which is what they do. Or they send him

a gift card to say thank you. You just work harder. So don’t be afraid to expect that out of your

16 | P a g e

real estate agent. So Mark when you get to a property with Rob, what are you looking at? What’s

on your mind, what’s the analysis look like, what is he looking for? What are you looking for

when you’re in the house?

MARK: The first thing of course is [INAUDIBLE – 1:00:00.2] deal I mean it’s not

going to be pretty in as far as the landscaping or the grass or you know that type of stuff. I’m just

talking can it look like a nice, nice house you know, normal house that middle class. You know,

whatever market you’re in is going to buy. So when you pull up your driveway, the way to

house. Some houses are sideways you know weird things like that. You see a house its built

where it faces sideways it’s that kind of that’s a turn off usually to most people. You want

nothing weird to jump out at you. No fine divisions put on over the last 50 years. Awkward just

a home owner addition. You definitely want, you’d have a feel for , you definitely get a feel for

what you like. You know you don’t want to super how about you want a nice house that most 9

out of ten people are going to like. Once you want that hit, you know it. See that point? I always

go in even if the house looks a little off and I’m not really interested, I’ll still go in and you

know, the next thing I’m looking for is the flow, does it make sense. Does it have a living room,

kitchen, dining room, how many bed rooms. You know, what the layout .Does it have you know,

a decent… make sense the flow of it. You know, if it has all that, then you could really start

getting in to what or what doesn’t need. You know the how’s the roof, how’s designing, how’s

the window, how’s the foundation. You’re not going to really look at that stuff right away, for

me I don’t because walk in first and you want to just know this is it, does this have potential?

Before you get in to the money rehab costs . You definitely just going to buy the flow of the

house and the feel of the house.

JOSH: Gotcha! So, some of the things that I’m writing down Mark taken notes on or some of the

disqualifiers as I hear you say them. And I’ve heard you say low ceilings bad for us, foundation

problems. The property was built and facing a strange direction, awkward home owner additions

changes. You know I heard you mention one the thing that popped out at me which was the flow,

basically you’re looking for sort of functional obsolescence and I don’t know how to spell

obsolescence. So that’s the closest I’m going to get but here’s the thing guys, here’s the

disqualifier, the very first investment property I ever bought for purely for investment reasons

back in 2001. Over 12 years ago, I purchased a two family home, a brick two family that I

moved in to and that was in 2001 and then by 2003, I bought my first investment property on

Dalton Avenue. The house on Dalton Avenue, I didn’t notice but I made a huge mistake and

luckily I was able to fix it up and sell the property on rent to own and it’s been cash flowing for

me ever since. But if it was my first rehab that I was counting on rehabbing and selling, I

would’ve definitely shot myself in the foot because it was functionally obsolete. What I mean, is

that the loan bathroom with a shower was of the kitchen. So here’s the deal, Imagine walking

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into a house, it was an up and down. Two bed room upstairs, one bedroom in the back of the

house. You walk in, walk in the living room which is great and you have two choices, you can

continue to walk through the living room into the kitchen or you can go up the stairwell on the

left hand side and up the steps. Well if you walk in the stairwell and up the steps, you walk in to

bed room number 1 and then through bedroom number 1 you walk in the bedroom number 2 and

bed room number 2, has a half path connected to it and it also has a nice closet. So you can walk

in up to bed room number 1 which is the front of the house of the steps but then you have the, if

you wanted to use the bathroom you have to do one of two things, you’d either walk in to bed

room number 2, okay and go to use the restroom or you have to walk back down the steps

through the living room in to the kitchen and into the bathroom. Now, imagine wanting to take a

shower, imagine taking a shower and walking in and up the steps and you live in bed room

number 1 or there is no shower upstairs, there is no bath tub, there’s no shower. You got to walk

downstairs in your towel?

MARK: Right.

JOSH: In your towel down through the living room, into the kitchen where everybody is eating.

Going in to the bathroom and take your shower. And then after the shower you, you’re sitting

there in your towel, you got to walk through the kitchen through the living room and back

upstairs to the bedroom. Functionally obsolete. Now I could’ve done a bunch of stuff to that and

probably move the bathroom, I could’ve probably added another full bath upstairs but this was

eleven, twelve years ago and didn’t know what the hell I was doing. And so, functionally

obsolete. Now I got lucky, I sold it on rent to own, I got $5000 down from the buyer and they

even paid me $600 a month rent to own for the last basically eight years. And so that’s great, you

know it’s a long term hold that I have but if they ever vacate the house, I will never be able to

sell it unless I put a new bathroom upstairs somewhere. So guys keep the idea. So that’s some of

the stuff that Mark says he’s looking for. The other thing I heard Mark say that’s really important

is that you’re looking for, what he said was a normal house, let me just put that under

perspective. For us, almost all of the properties that we buy are either colonials, ranches or splits.

They’re almost always a three bed, one and a half bath and they’re almost always in a very

middle class price range. For us, that’s between 125 and 150. Okay Mark, Mark I don’t

remember the last time

MARK: Okay.

JOSH: We sold the house for more than 150 or less than 125.

18 | P a g e

MARK: No, no I don’t. From the top of my, I can’t think of any.

JOSH: Yeah, you think like Fairpark was 120 something , Heights was 120 something , Ballash

is 142, Melody is 140 149, Gardener is going on the market for like 159 probably sell it in the

130-140 range. Same thing with homestead. Probably Edgewood will probably list 129 and

probably sell it for 115 or something, right?

MARK: Right.

JOSH: So that might be a little bit lower but guys here’s the point, regardless of whether you live

in Cleveland or you live in Chicago, you live in an expensive area, you want to be in an area that

a lot of people are potentially going to be buying. You want to be in an area… you don’t want to

be too low and you in the warzones, you don’t want to be in the tough areas where there’s a lot

of owner financing and a lot of investors and for us we don’t want to deal really high end homes

either because for us, you know you get up in the 400,000, 500,000 range. There’s a limited pool

of buyers who will pay that in North east Ohio. So for us consistently buying properties between

30 and 60 improving them with 20 to 30 and then putting them on the market 150, selling them

for 125 to 135. That works for us over and over and over and over again. So Mark you

mentioned things like, you know a normal house middle class, make sure the driveway is good,

make sure, you know there’s some curve appeal, the flow is good and you mentioned some

things like what does it need. So let’s talk about that for a minute. So you’re looking at the house

and you’re start and take sort of a mental inventory, right? Does it need a roof, does it need

windows, does it need siding and you don’t really kind of start to put together almost like a

general construction budget. So tell me about that.

MARK: When you walk in, that’s where you have to kind of made a property, you know

made decision and you have some interest in it. With me I’m just used to it, I’m going to check

first. Almost every house we work on like you said before, for us to make the $40,000, we know

it’s probably going to be rough. We worked on the few that we put in 15,000 our profits will be

smaller but with my rehab budget are usually somewhere between let’s say 25 and 35 or 40

because most houses they’re going to need sidings, a roof, windows, all new kitchen, all new

bath, flooring, doors, sidings but the way I go in I know generally most roofs in our area you can

replace some for around five grand or less. You know, you need to do sidings you’re talking six

to eight thousand based on the sides of the house. If you’re doing windows, we talked about

windows before, it took me a while but I found a great company out of Chicago that I know

every one that I’m going to put in, it’s going to be hundred bucks or less. A double hung vinyl a

basic window, because its middle class they’re not expecting a great window but it’s a nice

19 | P a g e

window for the price. Basic items, roof, window, siding, you know some of those and most

house you buy don’t need all of them. You know they might be a lot of them need new roof, ¾ of

them need windows. Most don’t need new sidings thankfully we’re able to get away without new

sidings. Maybe we’ll paint the house. You want to look at those first coz those are the big chunk

of your budget. And then you want to look at the kitchen, bath, all that but as far as my, the way I

price it I know who’s working for me already, I already know their prices of the contractor and I

know generally how long it’s going to take, how much labor cost is and then I’m going to be able

to put together a material cost from all my connections and all the past experiences coz I know

what stuff is going to cost.

JOSH: Right.

MARK: It’s going to take a few people who you now, we’ll talk about this in another time

but you really need to get a good contractor that’s either willing to go with you on some of these

houses or when you narrow down, you know bring them back with you to give you some prices.

Because you know as long as contractors don’t want to work on labor cost they want to give you

a full price, the materials and labor and everything together. But once you get someone you’re

comfortable with they will be able to, you tell them what you need [INAUDIBLE – 1:11:43.4]

and the more you work with them, the more you’re comfortable with them and the more that

they‘re going to give you a price break because you work with them more often.

JOSH: Yup, got it and guys we’re going to cover my brother’s going to walk through our, we’re

going to talk extensively about how we budget and repairs on Thursday. So we’re not going to

get in to that part right now but this is the big part of our formula. On what we go in, and what

we offer and how we do it. So this next portion guys I really want you to pay attention, this is

very important coz I’m going to walk you through this case study that you see on your screen.

This is let’s see what’s the address, it is 13667 Chippewa Trail, Middleburg Heights Ohio. This

is the house that we made an offer on this, this weekend and we did not get, we did not get this

property but I want to walk you through as an example to show you because what if we did buy

this house, if they pay more than what we are paid and what we offered, they’re either an owner

occupant or they’re going to lose their ass on this house. So on the screen you see 13667

Chippewa Trail, Middleburg Heights Ohio, it’s a four bed, three bath. It’s a two-one, so two-four

and one half bath, built in 1972. It’s 2462 square foot house and this is, it says on the remarks,

extra-large colonial with big room sizes. The home needs a buyer that’s willing to do work.

Bathrooms and kitchen need to be gutted. See disclosures. Sweat equity, great opportunity, no

showings until Saturday and Sunday. No offer will be viewed until Monday, that was yesterday.

So I was there on Sunday, walk through the house with Rob and here is the materials that we

used and so this going to fill in the gaps for all of you guys on how we arrived at our offer, why

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we offer what we offered and why we walked away without getting the house. First thing I want

to point out on this deal is this, this real estate agent was really, really smart. What I mean by that

is she put in here extra-large colonial, this home needs a buyer that’s willing to do work, beds

and baths need gutted see disclosures, great sweat equity, bah blah. No showings on until

Saturday or Sunday. No offers will be viewed until Monday. Now what did that do, that forced

all the buyers to show up at the house at the same time and for all the buyers to walk through the

house at the same time and see all the people who are interested in the house so they knew every

single buyer knew that if they were going to buy this house, they had to make an offer that

weekend. She basically did a mini property launch which is the same exact strategy that we use

that we’re going to teach you on module number 9. Now this is a very desirable subdivisions

sub-development or most of the homes are selling for between 140 and 160. So the houses

offered at 99-9 everybody knew this was a deal. So the way I found out about it was actually my

mother-in-law who is in the next street over, I was at dance class with my kids last Wednesday

and she says, hey there this house on my street that just went up for sale, it’s 99-9 which is

usually this is out of my brother I’s price range that we normally pay which is 99-9. Well I knew

the hell shit that neighborhood sells for 150 all day. I want to go look at it. So we started to do

some research and we want to see it. So another strategy for finding deals guys that we’re going

to tell you about is Birddogs . It’s not for us, it’s not sexy but we have people that know that

we’re constantly buying houses and they send us deals. There are whole sellers that sends us

deals, there are real estate agents that sends us deals , there are friends and family that sends us

deals and in my newsletter that I send out to raise money, to raise capital, you guys have that

newsletter I also talk about the fact that we’re looking for homes . So if they know anybody, they

can introduce us to a property. So you want to unleash as many Birddogs as possible. Alright, so

here’s the numbers on this house and we ran two scenarios and I want to walk you through both

of them. Hang on one slight, let me just put this where I want it. We blow up my screen. Alright.

So here’s Chippewa and here’s analysis number 1 that I did on the fly before I even saw the

house. And here’s the adjusted analysis after I was in the house with Rob and I had Rob’s CMA.

So pay close attention here guys, this is big alright. So I walk in a Chippewa and I think to

myself, you know I know the neighborhood, this thing is going to list for 179, it’s going to sell

for 161, we’re going to net 145, 90%. Then we’re going to subtract our profits, then we’re going

to subtract the improvements and then that’s going to be our max. offer price is 75. In my initial

offer price is 25% of the max. offer. So that’s basically I’m going to low ball it. Alright, so you

guys get that. So I take my list price, my after repaired value, times 90% to get my sale price,

times 90% to get my net proceeds, minus my profit, minus my improvements, equals my max.

offer price. And I thought to myself, okay this is competitive situation, I know there’s going to

be a lot of people looking at this house, so I really can’t low ball it. So I got to in… I got to in

guns blazing with my max. offer price of about $76,000. So before I go any further, does

everybody understand that? Does everybody see how I arrived with that number? Yes, yes sir,

yes, yes. Okay guess Sir Gloria, Patty great. Now I walk into the house and I start to walk

through and yet we confirmed it needs about $30,000 worth of improvements, we know we want

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to make at least 40 grand. So we start to talk and Rob says, look Josh your list price of 179-9 is

way high. List price on this is 159 and you’re going to sell it for 143. Your net proceeds is going

to be… I think the same formula ARV and list price is 1599, sell price is 90% of that, net

proceeds is 90% of that, minus my profit, minus my repairs and all of a sudden my max. offer is

not 76, my max. offer is 59-5. The actual offer we submitted was 64-5. And let me show you

what I mean. Here’s the CMA. Now what is a CMA? A CMA is critical to business. A CMA is a

current market analysis, a current market analysis that shows the value of homes. So Rob says to

me, says okay I pulled up all the homes for sale in Middleburg Heights, all the three and four bed

rooms, all the two and three baths, the square footage, the price per square foot, the days on

market, the original list price and [INAUDIBLE – 1:20:22.3] for sale. So this are the actives,

right here guys. And either the general search, the median on all the actives in Middleburg

Heights is right here, it’s 149-9, the average is 158. Now, more importantly, the contingents and

the pendings. The contingents meaning somebody made an offer that’s contingent upon

something else. You get rid of this linear drive coz this is a two bed one bath but here’s an Indian

Creek Drive which is a four bed two bath and here’s Jane’s drive which is a three bed two bath.

One is listed for 119, one for 168. Now how about your pendings? Now we’re getting serious,

your pendings are the ones that are actually on the market and sold. These are you three bed four

bath, a three bed three bath and your list price here 145-5, 169-9, 184-9. And so your average

now is 166. And now here’s we’re getting even more serious is your closed properties, here’s

your closed. And now here’s Poland Trail, originally listed for 199-9 then dropped to 179-9 and

sold at 160. That’s a great comp, a great comp because it’s one street over. So a little bit smaller

than ours, one last bed room than ours and it’s sold in a 160 days, it’s sold in five months. That’s

a pretty good comp though but listed on 199-9, sold for 160, much smaller, much lower price.

How about this comp on Delaware, this is almost exactly, this is a 2780 square feet, four bed two

bath, and original list price if 183 then dropped to 179, sold for 168. How about this one, York

town, this is a decent comp. It’s a three bed, three bath, 2,020 square feet originally listed at 199-

9 dropped all the way down to 152. So looking at these numbers, I am pretty confident that the

best comp is this one, slightly smaller though. Four bed, two bath, this 2,780 square feet, ours is

about 2450 square feet, listed for 183 then dropped to 179, sold for 168 and sold in 153 days,

that’s five months. That’s pretty good, so if had bought the house, fixed it, listed it, we probably

would’ve listed that 179-9, I’d probably would’ve been right but this one was slightly bigger

than ours, about 300 square feet larger. So we’re going to sell slightly lower than that one and

this one on Bartholomew here it’s another good comp. Four bed, three bath, 2,017 square feet,

listed 174 then dropped to 169, sold for 162. So 168, 162 is probably going to be somewhere

around there 160 maybe is going to be our sale price. So now, look at our analysis. I was

probably more right than Rob was, matter of fact I know I was more right than Rob was. List

price of 179, sale at 161, net of 145, profit of 40, improvements of 30, our max. offer was 75. I

thought initial would go in that 57 competitive situation, I can’t low ball. Rob is telling me list

price of 159-9, sale price of 143. Well again, based on these comps, right? I’ looking at 168 or

162 and my days on market is going to be this one, 197 days on market? This one, 153 days on

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market. Now my brother and I, we’re not in the business of holding houses for you know ten to

twelve weeks of improvements and then waiting five months to sell a home. We don’t like that.

So we’re going to have to be lower than these, lower than these to sell quickly. So I’m thinking

we’re right here listed at 179, sell 161. I think my gut tells me that was, that was dead on, that

was dead on. The actual offer of 64-5, you know I kind of split the difference between where I

was at and where Rob was at and I honestly thought we would get an opportunity to negotiate

and maybe make a counter offer. Turns out , the seller got eight offers yesterday and my gut

tells me that the buyer is an owner occupant buyer, somebody who’s going to buy the property,

fix it and move in to it and they obviously are not going to be looking to make a $40,000 profit

like me and Mark are. Now, am I upset that I lost the property? No, because my max. number

was 75 and I’m pretty confident somebody paid far more than 75. So we took a shot at it, we

made an offer and we lost out. Am I upset? No big deal, move on to the next one. So guys, what

are you ‘re thoughts , comments, questions about Chippewa Trail, anything that you think that

maybe I didn’t notice or something I would’ve or should’ve done differently or what are your

thoughts on the analysis? So James says in a higher priced market, what would you put to profit

number at when your figuring your max offer? Well Joe, honestly the numbers don’t change, just

imagine if I doubled all this numbers. So my if my list price is 360 and we’re going to sell for

90% of that and then our net is going to be 90% of that we’re still want to make a profit of at

least 40 grand. Remember what Kyle said last week, Kyle wants to make a profit of 60 grand coz

his working on more expensive homes. The improvements are the improvements that doesn’t

change and so your max offer price is a function of the formula. Joe it’s always a function of the

formula. So let me do another analysis, let’s just say, so let’s do Chippewa times two. Let’s do a

higher price. So let’s say we’re going to list at 400 and now I don’t know your market guys but

if… you know a lot of guys in these other markets like higher priced markets like L.A., in San

Francisco, in Seattle, in Tampa, if you list you’re going to sell for almost full price. So we take a

10% haircut in our area. Off of what we are going to sell it for. You may sell for full price but

let’s just assume that take a 10% haircut, so you’re sell price is now 360 and your net then is still

approximately 90% of your sale price. So what 360 times 90%, is 324. That’s you’re net. Now

subtract your profit, 40,000 and if you’re like Kyle maybe you’re more like 50,000 or 60,000

which you should. Guys we’re getting 40 grand and we’re working on a 100,000, 150,000

houses. If you’re working on 300,000 or 400,000 houses, 800,000 houses, you should expect a

lot more than we make. Profit and then improvements. Let’s just say in a higher priced home,

maybe you’re going to put in a little bit nicer stuff and so you’re doing improvements of 50,000.

So your net of 324 minus $40,000 profit, minus $50,000 improvements is 234,000 is your offer

price. And so that is what I would offer. Now again, is it possible that if there’s a couple

changes? So in your area if your more expensive, maybe you have a hotter market, is it possible

that you’re not going to have to take the 10% haircut. So you don’t have to subtract by 10%. So

maybe your list in sale price is almost exactly the same. So you don’t have to take that 10%

haircut. What about the, your net proceeds, that’s always going to stay the same, it’s always 90%

of whatever you sell it for. What about your profit, maybe you’re going to adjust your profit coz

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you’re working on a more expensive homes. You should expect more money and if you’re

working on more expensive homes, your improvement budget maybe more. Remember last week

Kyle, his one improvement he put in $120,000 in improvements. So guys you going to have to

make some adjustments, what we do in Ohio works for us, it works in most markets, except your

super-hot markets or you’re going to have to pay a little bit more and you’re probably going to

list and sell for full price. Alright, so let me pull one other comparison that I want to show you

guys and this is my current market analysis only for colonials. This property that we were putting

a bid on Chippewa Trail was a colonial. So notice the closed properties, this is colonial only and

so we wanted for Rob to pull colonials only, no ranches, no splits, colonials only and this is

important guys. So look colonials, the sale price. Look at the sale prices 136, 144, 156 but here’s

the thing guys, here’s a really important number when you’re looking to price your properties

and you’re looking at all colonials but there’s very, very different square footage amongst. Hey

guys hang on one sec. I got my daughters they’re banging at my door, they want to come in to

my office. Hang on one second I just have to say hi. Hey girls!

KIDS: Daddy!

JOSH: I’m on a live webinar. You have to upstairs okay? Want to say hi to the people and then

go back upstairs?

[CROSSTALK 1:33:43]

JOSH: Okay.

KIDS: No.

JOSH: Come here. Come here. Come and say hi to the people. This Juliana, Juliana just say hi

everybody.

KIDS: Hi!

JOSH: Say hi everybody!

24 | P a g e

JULIANA: Hi everybody!

JOSH: Alessandra come over here honey come say hi to the people, say hi everybody!

ALESSANDRA: Hi!

JOSH: You have to go back upstairs coz daddy is working okay?

KIDS: Walk with us…

JOSH: I’m going to walk you out because I was working. Okay go back upstairs with

mom.

JOSH: I know sorry I’ll be up there in a minute.

JOSH: Okay guys sorry about that. Sometimes I work from home a lot so I’m very fortunate to

be home with my kids a lot which is great. Isaac, that was awesome! So guys here’s the thing,

notice this CMA report is colonial only. Colonial only and so we wanted only the Rob took see

style it says Cape Cod or colonial or Tudor or Victorian. Those are all kind of the same type of

properties. Now notice my other CMA, when I scroll up this is all pendings, expired etc. So

believe it or not, the ranches are selling for a higher price than the colonial. People in this

neighborhood prefer the one-floor ranches than the colonials up and downs. People don’t like to

go up and down the steps. So when I looked at this I said okay. Remember I thought I was

smarter than Rob, and I was thinking sales prices 162 – 168. Well those are the ranches. People

prefer the ranches and so they’re paying more for the ranches. And they’re paying less for the

colonials. So we were working with a colonial so you got to take that into account. Very

important. So if you want to get real detail about it guys, this is to some degree a numbers game.

It’s a matter of improvement numbers and it’s a matter of resell prices. Here’s the other thing

guys that you need to know about and you need to pay attention to this. price per square foot.

Notice the closed properties; the price per square foot is $78 and 93 cents a foot. So here’s

another way to make the comparison on are homes going to sell for. Well our subject property on

chippewa trail is 2462 square feet so it’s a big house. 2462 square feet, multiple that times $78 a

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foot, is another way to calculate. So 2460 times $78 a foot this has a price per square foot of sold

price of 191880. 191880 price per foot. So these colonials sold for much less 144 and 156,

because the square footage is almost 5 to 600 less square feet than the subject that we were trying

to buy. So now I’m thinking okay, now what’s the real price here? Was list 179 sell at 161? Or

was list 159 sell at 143? Well I thought I was smart and then when Rob pulled out the colonials I

thought he was smart. And then when I went back in and looked at that price per square foot I

thought maybe we were both low to be honest with you. Coz remember based on price per foot

2450 square feet times $78 a foot that equals $191800. That’s the sale price the sold price. Not

the list price the sold price. Very important to understand these numbers guys. Mark hey so were

back to kind of talking about right this value and when you’re looking at making an offer to a

property, how important is this?

MARK: As far as getting the square footage

JOSH: Sort of getting an actual resell price. Getting an accurate number of what we think

we’re going to sell the home for and how quickly it will sell for.

MARK: I think you need as much information as you can. One of my biggest points doing

this long enough, haven’t made agent like we have Rob, who can do the numbers and pull as

many different types of numbers as possible. And I do my research too [INAUDIBLE 1:39:43.2]

website. People get comfortable with. But you definitely need to know what your low number

is. Everything just goes bad and for some reason you just have to know this. What’s kind of the

low price of that neighborhood that you could sell it at. Like you said, you might have a number,

Rob might have a number, and another agent might have a number. But altogether you’re going

to definitely get a good idea of where you’re going to sell at. And you don’t want to buy a house

until you know exactly what you’re dealing with and what the resell price is.

JOSH: Yeah absolutely. I mean it’s almost like the most important thing. Like you said

Mark, its determining the after repair value and sale price is what triggers the rest of the formula.

And so getting the list price and the sale price that’s most important to really understanding what

you can pay. Because it’s those numbers minus the profit, minus the repairs leaves you your max

offer price. Now at the end of the day, looking at these numbers, this is great data from Rob. The

really important number that we really want to look at is the colonial price per foot of $78.

That’s an important number. The other big number that’s really important when I looked at this

was your average days on market for your sold properties. So your average days on market here

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is 132. So CDOM stands for Cumulative or total days on market. 132 days on average. So for all

the properties that had sold in this city, which is a very desirable area. So 132 days so what we

would be looking at is if we got the repairs finished and on the market the thing would probably

sell within 3 months, and then the buyer would take another 45 days to close and that would put

us at approximately 132. So when I look at this project, I’m looking at 10-12 weeks of rehab, 2-3

months to sell it and 45 days to close. 45 days to close. Now if I want to shoot, to close sooner I

need to be able to sell for less. So if I want that and if I want this project to take us 3 months of

improvement, 3 months to list and another month and a half for the buyer to get approved for

their financing, that’s seven and a half months. Well Mark and I we want to do our deals in 6

months or less all the time. Six months or less, six months or less It doesn’t always work out that

way but that’s sort of our number that we’re shooting for. Sometimes it takes us 8 months.

We’ve had a couple that’s taken longer than that. We’ve a couple that had taken us 4-5 months.

But six months is really the number we like to shoot for. And so if I wanted to be less than the

seven and a half month timeframe, even though ,my price per square foot indicates that I could

sell it for 191, that would be waiting the full 4 months for it to sell. 2450 times 74. So I did one

more calculation which is, the property is 2450 square feet and your average price per foot for all

houses closed is $74. The colonials were 79, but all houses is 74. So you want to be right in that

number. So let’s just say we split that in half and we’re at $76 a foot times 2450 square feet, our

sold price is 186. That’s our number. But that’s if we’re willing to wait seven and a half months.

And we’re not. And so If I wanted to wait less, I’m going to subtract $15,000 roughly, to get my

new sold price of a run a buck 70. So again we’re kind of floating in between my analysis and

the higher analysis at $78 a foot, 191000 is the sale price we’re going to be somewhere in that

neighborhood. So my actual offer of 65, I could’ve gone up based on this analysis as high as 75,

looking at price per square foot, I probably could have gone up as high as 85. Probably could

have gone up as high as 85 and looked at a sale price of around 171-172 because this almost

2500 square feet versus the others ones where 18 1900 square feet. So could I gone off to 85?

Yeah, I would have been comfortable based on this analysis going up as high as my initial policy

as high as 75 maybe even as high as 85 but then again you look at Mark’s analysis, what’s our

bare minimum to get out of this thing. If I buy it for 85 and I put 30,000in to it, I’m into it for

115. I knew it’s going to sell for at least 150. So my 150 times 90% is 135 and in on it for 115.

So my worst case scenario, even if I had paid 85, and only sold it for 150, we would’ve made 20

grand on it. 20,000 bucks on it, that’s worst case scenario. So let me summarize again and Mark

let’s kind of walk through this one more time. Step 1, is you’re going to set up your search. Mark

uses Zillow which is fantastic. I would prefer to see you guys on MOS drip. Mark you set this up

with Seth we need to set this up for you with Rob. It is to get MOS drip under your criteria. Our

criteria 80 and under. Pre-programmed cities or 20, 30 cities that we like, 900 square feet or

bigger, two to three bed rooms or bigger, one bath or bigger. You can also use resources like

Zillow, home steps, home path and hudhomestore.com. Step 2, look at the pictures, look inside

the house in the picture and look for curve appeal. 92% of home buyers start their search online,

that’s what we’re doing. Step 3, look at comps. What’s been sold around it and you’re going to

27 | P a g e

have guys a general idea, If you’re in real estate. You know, Mark how important it is just going

to driving around and getting an idea of what prices are, right. That’s so important isn’t it?

MARK: Correct. Sure. Going to keep up the day with what’s going on so yeah.

JOSH: Yeah. So you know Zillow is not perfect, the only thing that’s perfect is the MOS, That’s

the only thing and if you can’t get access to the MOS here’s an idea. For those of you guys, this

is what I did, I’m not a real estate agent, I’m not a broker so technically I shouldn’t have access

to the MOS but I do, here’s how I did it. I signed up to be an assistant to a realtor. So even Mark,

you should go down even though you already took the classes, if you’re not going to go take the

test you should go sit through the two hour class at the MOS so you could become an assistant to

Rob so you can get your own username and password coz if you take the marketing assistant

class, guys this is for everybody nit just my brother but when you take the marketing assisting

class, you get access to the MOS just like a real estate agent. You just not allowed talking price.

So for about 50 bucks, you can partner up with an agent and say look I’m want to buy properties,

is it okay if I sign up as an assistant under you so I can look for homes and when I buy a home

you’ll be my buyer’s agent. That’s a short cut of getting access to the MOS that we do, yeah I

think we have like seven people in my company who are assistants to realtors, who have access

to the MOS. Step 4, look at the price history. Again, ideally MOS you’re going to show transfer

history, listing history and days on market in the MOS. If not, you can use Zillow and you can

certainly ask your title company. You can also use the county auditor’s website. So for us we use

the Cuyahoga County, the Medina County, and the [INAUDIBLE – 1:49:29.3] county auditor’s

sites and all we have to do is plug in the property address an it will tell you all the times that

property has been transferred and what it sold for. Step 5, That is if you find something

interesting, that looks like it’s got meat on the bone like Ballash road, you’re going to go look at

it and you’re going to take a half day or a whole day. I use to go every Friday. Mark I don’t

know, do you have like a day of the week that you like to go or is it just kind of whenever you

find like you know a handful of properties you want to see ?

MARK: Yeah I know. I usually jump on them because I know if they don’t look at them

right way I stay in Rob’s case about it but I know he works his butt off. But when I want see

something I want, I see it you know yesterday. So I usually transfer the codes try to get as quick

as I can. I got to go on at ten o’ clock at night or five in the morning. If it’s something I want to

see, I just make time for it as much as…

JOSH: You got it.

28 | P a g e

MARK: Possible

JOSH: Yeah the good and the best deals go fast. So got to get jump on it. And guys we went

through some these documents. I’m going to put the CMAs into the membership site, so you

guys have access to those and guys what we’ll do is I’m going to be with Mark again, Thursday

in two days and we’ll talk about writing the offer, making the offer, earnest and money deposits,

counter offers, making the bids and also talk a little bit more about disqualifiers. We will

continue with this conversation about how to find your deals with zero marketing budget. And

Mark’s also going to discuss the starting of his analysis of repairs. What is the kitchen going to

cost, what is bathrooms going to cost, roof, siding all those wonderful things. And so guys we

have to jump off this line right now because we have another coaching class that’s going to begin

at four o’ clock with different group but I want to thank you guys for all questions. I will be

answering all of you questions inside of the 40K flips, Google group and Mark thanks a lot for

you time dude and we’ll see you on Thursday, okay?

MARK: Okay, see you then.

JOSH: Alright guys, thanks a lot. Talk to you soon. Take care.

***END OF TRANSCRIPTION***