Day 3Contractors

My Contractor Live!

Renovating

Going Fulltime

Advanced Wealth Building

Foreclosures

Owning Rental Property

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Contractors

You’ll Discover…Some Contractors are Criminals

How contractors make money

Finding Good Contractors

Hiring and Working with Contractors

Contractors Can Be Criminals

San Deigo Sports Anchor

Ex-prisoners become contractors

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How Contractors Make Money

Mountains out of Molehills

High Bids

Not Passing on Savings

Jacking up materials costs

Using materials from other jobs

Cheap Sub Contractors

Finding ContractorsApartment Unit Turn-arounds

Call Apartment Building Managers

Investor Rehab Projects

Other Investors, Investor Clubs

Dumpsters in driveways

Angie’s List for Specialists

Plumbers, Electricians, etc

Finding ContractorsApartment Unit Turn-arounds

Call Apartment Building Managers

Investor Rehab Projects

Other Investors, Investor Clubs

Dumpsters in driveways

Angie’s List for Specialists

Plumbers, Electricians, etc

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Contractor Red FlagsNot licensed, bonded, insured

Focuses on high end remodels

Strong sales skills

Not busy at all

Friday after lunch

Get Three BidsBest way to understand rehab costs

Great way to compare contractors

Compare apples to apples

Hiring ContractorsSimple Agreement

Clear milestones and timeline

Penalties for exceeding time limit

Understanding who is doing the work

Pay for materials or provide receipts

Pay for correctly completed work

Only as good as you are

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Hire vs Be Your GC Hiring a General Contractor (GC) increases costs but saves time

Being your own GC saves money but increases time

GCs may not pay the subs

You may not know what to do

Inside the Mind of a Contractor

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Renovating

You’ll Discover…Cleaning

Cosmetic Rehabs

No permits

Full Rehabs

Permits

Cleaning TenetsClean before replacing

Wash before painting

Remove junk before demolition

Lower the price before renovating

Cleaning works wonders

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Cleaning TipsCarpets professionally cleaned

Pressure Washing Exterior

Bleach the Roof

Orange Glow on Cabinets

Old English on Exposed Wood

Tile & Grout Cleaning

Cosmetic RehabNew paint (walls, cabinets, countertops)

New floor coverings (refinish hardwoods)

New hardware (door knobs, etc)

New ceiling fans, light fixtures

New Appliances

Landscaping

Cosmetic Rehab TipsBuilder grade colors and materials

Even if outdated, make the house feel brand new

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Full RehabsNew Roof

New Cabinets, Vanities, Sinks

Foundation repairs

Add/Remove Walls

Significant Plumbing, Electrical, HVAC

Adding Square Footage

Full Rehab TipsMatch neighborhood improvement levels

Spend the money on the kitchen

Stay away from mission creep

Expect 20% above budget in over runs

Don’t convert garages into living space

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Going Full Time

You’ll Discover…Benefits of a J-O-B

Myths of Full Time

REI works great Part Time

Drawbacks of Full Time

Preparing for Going Full Time

How to Succeed Full Time

Full Time Long Term Benefits

Benefits of a J-O-BSteady J-O-B Paycheck

Deal Patience

Clear Thinking

Staying Power

Funds Fledgling Business

Perfect Time Management Training

Pick Up and Put Down

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Full Time MythsNo more bosses

No more alarm clocks

More Time = More Profits

Sink or Swim Motivation Requirement

Being your own boss is better than working for someone else

REI Works Part TimeCan just as productive part time

Steady J-O-B paycheck creates power

Nights and Weekends are prime time for residential Buyers and Sellers

Job pre-occupies during waiting periods

Elapsed time is your friend

Internet Billionaire Poison

Full Time Drawbacks You are now the one in charge (E-Myth)

Paychecks can be more unpredictable than a full commission sales job

Office comes home with you

Desperation reduces deal profits

Lack of Cash Trap

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Full Time PreparationMarketing Machine Humming

Real Estate License

Marketing Funds/Line of Credit

Deal Funds/Line of Credit

Personal Expenses Cushion

Best Person to Lead Your Company

Ready to Lead Your Own Company

Excellent Time Manager

Master Investor

Can Lead Yourself

freedommentor.com/CEO

Full Time BenefitsRite of Passage for Most Rich People

Excellent Trainer of Financial Success

All efforts build your financial future

Produces Complete Control Over Your

Time

Financial Future

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Wealth Building

Strategies

You’ll Discover…Legal Entities 101

Doing Business in an LLC

Investing Tax Considerations

L.O.C. Arbitrage

Rental Property

Solo 401K

1031 Exchanges

Legal Entities 101Sole Proprietorship / Partnership

Corporation

C Corporation

S Corporation

Limited Liability Company (LLC)

Limited Partnership (LP)

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Why Legal Entity?Liability Protection limited to entity

Rich Global, LLC

Alternative: General liability insurance policy

More expensive than a legal entity

Entity SelectionLiability Protection (all except sole proprietorship)

Tax Considerations

Federal Income Taxes

State Income Taxes

State Business Taxes

The LLCLiability Protection

Cheap and easy to set up

Very easy to maintain

Can be taxed as a Sole Proprietorship / Partnership or an S Corp

Set up in your state vs Nevada/Wyoming?

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LLC Tax DetailsTaxed as Sole Proprietorship

Paid in Distributions (K1 at year end)

Self employment taxes

Taxed as S Corp

W2

Investment Income

Flipping vs HoldingLLC # 1 does the Flipping

LLC # 2 does the Holding

LLC per Rental Property?

Tax Return creation and filing

Yearly LLC costs

Separate bank account costs

LLC TipsSeparate Bank Account (connect to Personal

Separate Credit Card (builds credit)

Lend to your LLC personally when it needs money for a deal.

Buy as much as you can with your LLC

Computers, Cars, etc

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L.O.C. ArbitrageHome Equity Line of Credit

Unsecured Personal Line of Credit

Business Line of Credit

Borrow from your 401K

Rental Property Line of Credit

Beware of Cross Collateralization

Retirement InvestingShort term deals are best

Traditional vs Roth

Self Directed IRA vs Solo 401K

Self Directed IRA

Equity Trust and Pensco Custodians

Very inexpensive to establish

Charge you per year on assets

Nickel and dime yeah on transactions

Lengthy transaction processing

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Solo 401KExpensive upfront cost to establish

Your Own Bank Account

You make all the decisions

Borrow up to $50,000 (or 50% of assets)

Contribute up to $52,000 total towards this account per year.

Rental Property Tax Advantages

Depreciation

Mortgage Paydown

Appreciation

Property Improvement

Refinance to Profit Tax Free

1031 Exchange

1031 ExchangeDefer all taxes on gains to next deal

Investment Property (2 years)

Greater than Net Selling Price

45 Days to Identify

180 Days to Purchase

Refinance to pull cash out

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1031 Exchange StepsContract with Buyer

Identify Intermediary

HUD Approval

Proceeds are Escrowed

Identify 3 Properties in 45 Days

Close within 180 Days

Ultimate Wealth Building Formula

Flip LLC taxed as S Corp

Pay Yourself Lowest Salary Possible

Max Employer Match Solo 401K

Once you hit about break even

Flip rest of the deals in Solo 401K

Buy rental property and 1031 up in LLC

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Advanced Deal

Selling

You’ll Discover…Advanced MLS Tips

Overcoming MLS Listing Challenges

Advanced Investor Buyer Tactics

Advanced Tenant Buyer Techniques

Managing Multiple Offers

The Art of the SaleThe Art of the Sale is all about what you leave out

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Property PreparationGOAL: Spotless and Smells GreatNew light bulbs throughoutScentcy Candle with TimerZolex carpet stain removerThe Gonzo smell removerMr Clean Magic Eraser (scuff marks)Ceiling spray over old stains

Home StagingSells faster and for slightly higher priceHigher end properties (cost is justified)Companies that own their furniture cost lessAssemble your own staging furniture?

Advanced MLS TipsPricingExpirationImagesPublic DescriptionRealtor RemarksShowing InstructionsVideo

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PricingMost important part of an MLS ListingThe Tipping PointBest list price is just below the Tipping Point“…If it’s listed at this amount, it would be a steal for someone…”Kiss of DeathGOAL: Multiple offer situation

ExpirationThe most powerful time a listing is on the MLS is the first few days.The MLS fines agents that withdraw and relist listings.Loophole:

Set Listing to Expire after 3-4 weeksThen relist if you don’t have an offer

CDOM: Combined Days on Market

ImagesChoose during semi middle of the day with sun directly on front of house. Front View, Backyard, Kitchen, Living Room, Master Bed and Bath, Any ViewsWide Angle Lens is Best (Good equipment investment in your business) Less is MorePhotoShop / Image touch up services

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Public DescriptionBuyer can imagine living in the home.

freedommentor.com/home-selling-tips/Word Study Results: Don’t Use the Words

Motivated SellerGood BuyVacantGood Location Fully Renovated, Major Repairs

Use “Freshly Updated” and “Well Maintained”

Realtor RemarksEasy to Show, Client will thank you for showingShowing InstructionsDo not disturb occupantsIf not owner of record, add in:

"...This property is being offered as a principal-driven sale for his own account. All bona fide offers will be seriously reviewed and evaluated..."

Showing InstructionsSimple MasterLock lock boxUse professional showing service

Showings.comRequest feedback before the showingCall/Text for feedback directly after the showingThis is your highest priorityKeep copious notes of showings feedback

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VideoGoPro is Wide Angle (editing required)

Royal Palm Example

YouTube Capture Phone AppWingate Example

iPhone Filming TipsSlow, sweeping moves

Post on YouTube, Title is AddressIf it doesn’t turn out well, don’t use it

Listing ChallengesEnlist a Flat Fee Lister like NormalIf questioned, show Section 13 Marketing of your Contract with SellerSome MLS systems across the country have an “Equitable Interest” checkboxMove on to another oneTry the full service listing routeGet on title

Price DropRefresh the ListingContact previous showings

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24 Hour Offer RuleDon’t countersign/finalize an offer immediately.Wait until the offer is about to expire to respond/finalize.The waiting is excruciating to a buyerThey aren’t going anywhereAnother offer may come in

Multiple OffersHighest and BestGive 24 hours to respondHighest = Price – ExpensesBest includes…

Non Refundable Earnest Money,Closing with Your Closing CompanyPre Qual with Your Mortgage Broker or

All Cash BuyerDon’t Cut off #2 until #1 is Locked In

Investor BuyersNothing Beats Handwritten Signs

Try “Flip This House” titleListing on the MLS

Disclose that it needs some work

Postlets.com (Craigslist, Zillow, Trulia) REO AgentsOther Rehabs in the Area

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Tenant BuyersNothing Beats Handwritten SignsNew Craigslist Post Every DayZillow, Trulia RentalsMove Rentals Rental Rate = List PriceSingle Family HomesDown Payment vs Income