Hi everyone and welcome to our real estate investor hangouts. Tonight I’m going to be talking about the five keys to unlocking you real estate investor matrix, so thank you for coming to the call and this will be happening every Thursday night at six o’clock pacific time and nine o’clock Eastern Time. So sit back and relax with a drink of tea or whatever you want and enjoy our show.
Tonight I will be going over some basics for newbies and it introduces them to the actual beginning of real estate investing so if you see me looking around the screen I’m kind of managing the show and also talking to you so I’m going to check on you to know if it’s being broadcast over on Google+, on Facebook and if we have any comments coming in now on the chat. So thanks for coming tonight and we hope to see you every Thursday night. It looks like I have lipstick on my teeth so I will take that off. Sorry. Anyway, thank you for coming and welcome to the call.
Tonight I will be discussing the five keys to unlocking your real estate investor matrix. But for newbies what I want to do is first talk to you a little bit about what is the best kind of property to go after because sometimes new investors will make the mistake of looking for a house that’s similar to the one that they live in and that’s really not the kind of investment that you need to make. So I had my son make up a few little Lego props for us to use tonight so I am going to bring one out.
The first one is what you might call a luxury home or a move-up home. Let’s get it closer to the screen here. All right so let’s look at the front, see some nice landscaping. It’s probably a two-story house. It’s got a lot of bedrooms. Lets look over on the side. Okay it’s got kind of a nice, see the limo there, the black limo, some nice landscaping on the side and as we swing around to the back, there’s a pool. Okay with nice landscaping, now that’s the kind of house you want to live in but it’s not the kind of house that you want to remodel or maintain as a rental. That’s what you want to live in after you make the money from the other houses. Now I don’t know if all of you realize if you look at the number of properties that are out there on the market, half of the properties are starter homes.
Starter homes are typically smaller homes, 1000-1800 square feet, two to four bedrooms. They’re not that big. They don’t have that big of a yard. Twenty-five percent of the homes are move-up homes. These are the homes you move up into after you had your starter home and then the other 25 percent are luxury homes and those are the large ones like I just showed you with big pools, lots of acreage. They are very hard to maintain and somebody might look at that and say gee I could make a lot of money if I did one of those, but you also have to realize the cost that you have to lay out to do that kind of property.
So we want to stick with starter homes. It’s fifty percent of the market and they sell very quickly. The people that are moving in aren’t that sophisticated. They just want to move into something that’s already fixed up and the other thing with a starter home is that they have to move. They are moving from an apartment so they probably have a baby on the way, they already have a baby, the second one’s on the way, they have two babies, two kids and the third one’s on the way. They have to move to get some more space okay?
In a move-up home, what happens is they’re already in a starter home and they can think about moving. They can look around. They are not in a hurry. Those homes stay on the market longer so they’re slower to sell and they’re only 25 percent of the market. See, you really want to stick with starter homes, fifty percent of the market and they move very quickly. So anyway, those are the homes you want.
So here’s a starter home. I’ll just hold the other one up as an example. So you can see the difference in size, the difference in the yard, so this is a nice basic starter home. There’s a front yard, not too much landscaping. Ok its probably a one story house and on the side we can put in an RV because we are in California. Let me get this shadow off my face. So that’s a starter home. It doesn’t have that much yard, not a lot of landscaping. Notice no pool in the back. Okay there is probably a yard in the back but no pool. Okay so this is the kind of house that you’re looking for. Remember about a 1000 square feet or I would like to say up to 1200 to 1600, up to 1800 square feet. So that’s what you can look for.
So that being said, let’s jump right into the real estate investor matrix. This is something that I put together. I made a slide for you on it and what I’m going to do after the broadcast is make it into a infographic so I can send it out it’ll be posted where we see the link to the video either on the event page or Facebook or Google. You’ll also be able to get a link if you sign up for hangouts. You’ll automatically get an email with that infographic on it so that everyone can have it.
So what the real estate investor matrix does is, it helps people figure out what their best resource is and then how you’re going to use that best resource because people have their strengths in some areas, weakness in others and they need to really focus on their best resource and use that in their investing. So again if you see me looking around the page, I’m trying to see where all my slides are and things like that. So let me pull up the slide and I will begin to go over what you need to do and what your resources are. People, some other resources that you might consider are your credit, your cash, your skills, and your time. So let me take a look at that and load it up for you.
All right so here’s our real estate investor matrix and it’s a little small. It’s up there in the left-hand corner. So you see the four resources that you have: cash, credit, time, and skills and what I’ve done is drawn a symbol between those four different resources that you have to let you know what type of investing you should do if you have a majority of your resources in that particular quadrant.
Okay so let’s start at the bottom. If you have a lot of time and some skills in terms of finding properties or doing mailers, your best bet is to start out wholesaling properties. See, if you have time and skills but no cash or credit so think about that as you know, the way that works and I don’t really have any drawing tools that I can use to kind of overlay this while we work. I’ll just have to do our best. You know discuss it as we go, to have any drawing tools maybe uh okay let’s see if I can draw some lines maybe in red that would be a nice color. Okay so that is it. Just add another piece a paper, I can see that’s not going to help us.
All right so if you have time and skills, you really want be wholesaling property and I’ll discuss a little later what those skills would be. If you have a lot of cash and credit you can work as a private lender. I have moved the private lender way over closer to the cash because it works best if you have the most cash. Sometimes you can use your credit and be a partner on a property because you have really good credit and the investor probably doesn’t because they have a lot of other properties in rentals and their credit is not as high as yours, so cash and credit make a good private lender.
Now let’s look at the two sort of more traditional ways that people invest in real estate. If you’re a flipper you will need lots of time. You’ll need the skills to do it whether it’s doing the work yourself but mostly managing the crew and also finding the properties. Then you also need some cash or access to the cash perhaps from a private lender. So as a flipper you’re going to need more things going on at the same time to make that work.
Okay, let’s look at landlords. As a landlord you’ll need some cash and you can get started with not too much if you taking a property over subject-to but people want to see a down payment usually and you need some credit because if you want to borrow any money even from a hard money lender these days they’re asking to show some credit scores even if they don’t, they’re not high credit scores but they want to see what your credit is and you also need some skills. So the landlord skills: some of those have to do with remodeling the property and some just have to do with picking the right tenants because some landlords will buy the property already fixed up which you know you’re welcome to do but again you need the cash and credit to do that.
So what I want you to focus on is: Where do I fit in? Where are my highest resources and that you should start investing in an area where you have more resources than the next guy. So don’t just go and say well I’d like to be a flipper but you really don’t have any time and you don’t have the skills. The least amount of time really is a private lender. What takes the most amount of time is wholesaling, because you find the properties, negotiate the properties and then also find the buyers. But you don’t need any cash and credit so it’s a good way to start if you are starting with not much money.
So with the wholesale you need a lot of time. Skills: what kind of skills would you need to know about? Mailings: how to do a mailer, how to do bandit signs, how to do door-knocking. Those are the kind of things you can use as a wholesaler.
As a flipper, your skills are more in line with finding the properties, which you can do all the same things a wholesaler did or you can just buy the property from a local wholesaler. So you need skills in managing your crew. You need some accounting and budgeting skills because you have to keep a tight rein on how much money you spend in order to make money when you flip it, so there’s some other skills you need as a flipper.
As a landlord you’ll need skills to do with remodeling, budgeting, and also selecting the right tenant: in knowing when you are going to need that BS meter. You need to know when to believe the tenant and went to just kick him out and start over and you can. You know the more credit you have of course you can leverage yourself and have a few more rentals.
And if you have cash, you can be a private lender. It’s a good way to kind of observe some deals before you kind of put your money into a deal that you’re working on, or you can put your cash into a deal that someone else is running as a private lender. In that case you can observe the deal you are not going to make as much money but you are still going to make a nice return and that return will be, you know, more secure because you’re the one lending on the property. You get paid first when they sell it and the people who flipped the property, they’re only going to make money if there’s a profit in it.
So if you are a private lender, you’d have your property secured by a note and a deed of trust on the property or a mortgage in certain states and so that’s what you would want to do. In California we call it a note and Deed of Trust. In other states they’ll use the mortgage setup so anyway that’s the Real Estate Investor Matrix.
Now I said five keys. What’s the fifth key? The fifth key is, let me um turn this back off for a minute, the fifth key that you’re going to need, let me put my logo back there of course now I have this line moving around its kind of attached to my head. Lets see if I can turn this off. There we go. Let me get my identification back on there, all right.
The 5th key is teamwork. Everyone can’t be good at everything in life and they certainly can’t be good at everything in real state and it’s something that maybe gets glossed over when you go to training because they have a team in place. So when they talk about your team, as your escrow officer, your agent, your accountant, your attorney but those are the people working with you day to day on getting a property, and making sure you make a profit. Those are really professionals that you’ve hired to work with you.
So a team is really three other people, probably two: yourself and two other people that have skills in different areas and can use their skills to the best of their ability, so if someone’s really good at finding a property, someone else is probably better at the accounting. Someone may be very good at working with the contractors, but they’re not so good at finding properties. Someone else is really good at finding the properties and they’re not so good with the details about escrow or finding buyers for the property. So what you really need to do is find a small team of people, other investors.
I suggest you go to realtor meetings and real estate club meetings in your area and just try to meet other people that want to invest and have skills in certain areas and that way you know you can work with a nice group of people and you’re not doing all the work. You can’t be out in the field watching the rehab and also door knocking and sending out mailers. You just can’t do it all at once.
So build your team. Figure out what’s your highest resource. Is it cash, credit, time or skills, or a combination of those and then plug into the best kind of real estate investing for you to start with. You need to start someplace where you have the right number of skills and you can handle it.
So that’s our info for tonight, I will be doing a call every Thursday, a Hangout, sometimes I will be bringing in a guest, other investors who are doing quite well in their market. I’ll be interviewing people in different markets across the country. I have a couple of people lined up right now. One would be Phoenix, one who does deals in Sacramento, Texas, one investor in Massachusetts who’s going to work with us. So, I will be interviewing people like that.
I’ll also be talking to you about how to invest with your IRA money. We use a lot of IRA money in our private lending at Wise Wealth University. Follow me on my Facebook page. There’s a Facebook page for Wise Wealth University. There’s also a Google+ business page for Wise Wealth University and you can also follow me on Twitter. I am going to load up. Anyway on Twitter, I am the pink professor hence the pink shirt and so follow me there and you’ll be getting notifications about, you know, the different hangouts that we’re going to have.
So that is all for now tonight. I will be looking forward to seeing some of you on the call next week and remember to check out Wise Wealth University on Facebook. Check out Wise Wealth University on Google+ and pinkprofessor on Twitter and everyone have a great evening and I will see you next week.
5 Keys to Unlock Your Real Estate Investor Matrix
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