How to Flip Properties with Little To No Money

1. How to Flip Properties with Little To No Money By Waleed Solangi

2. Why Real Estate • “Ninety percent of all millionaires become so through owning real estate. More money has been made in real estate than in all industrial investments combined. The wise young man or wage earner of today invests his money in real estate.” - Andrew Carnegie, billionaire industrialist • “Every person who invests in well-selected real estate in a growing section of a prosperous community adopts the surest and safest method of becoming independent, for real estate is the basis of wealth.” - Theodore Roosevelt, U.S. president • “Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world.” - Franklin D. Roosevelt, U.S. president • *Interesting Fact: 1/3 of all houses in America are fully paid for and free and clear of mortgages

3. Advantages of Real Estate • Appreciation • Depreciation (taxes) • Cash Flow • Leverage (taxes) • Forced Equity • Inflation • Loan Pay down • FREEDOM!

4. Different Types of Real Estate Transactions Retail market Off market 5% of transactions are off market Not sold with realtor Will need excessive repairs Not so smooth: Title Issues, liens, tenants, city code fines, etc Usually sold 30-60% of retail value Bank don’t finance houses that need major repairs • 95% of transactions are retail • The traditional method: list with realtor • Will need very minor repairs • Usually smooth transaction • Usually sold +/-10% of retail value • Bank Financing allowed

5. Different Types of Real Estate Asset Types Investment strategies Fix and Flip Wholesale Wholetailing New Construction Rentals Lease Option Short Sales Owner Finance AirBnB • Single Family • 2-4 Units (residential) • Apartments • Commercial (industrial/office/mixed use) • Assisted Living • Land (farm, ranches, hunting, mudding, etc) • Mining Sites (minerals) • Self Storage • etc

6. Why Wholesaling • You essentially provide real estate assets at whole sale price to other investors • Allows you to enter the real estate market with very little capital • Allows you to network within the industry and identify the key players in your market • Stepping stone to fix and flip and rentals • Allows you to learn the industry with very little risk • Primarily a marketing gig • You are just the middle man shuffling papers

7. How Does Wholesaling Work? • Wholesaling in a nutshell: you buy a house for far less than it is worth and then sell it at a markup to other investors • Formula for calculating wholesale prices for houses: • (ARV * 70%) - repairs = what investors are willing to pay • (ARV * 70%) – repairs – your fee = the price you have to buy or put under contract *70% is a rule of thumb. Each market is different. Some markets are willing to go up to 85%. Assess your market accordingly. This percentage is what the flipper is willing to make on the flip. *ARV = after repair value. Value of the house based on comparable sales within the area

8. Example Wholesale Deal • House is worth $100,000 if it was in great condition and move in ready • Seller is going through divorce and needs to sell house immediately in as is condition without making repairs. • The repairs are estimated to be about $25,000. • Our offer to the seller will be: (100,000 * 70%) - 25,000 – 10,000 = $35,000 • If seller agrees to the price, we will lock it up under contract for purchase with 5 day inspection period. • We will then try to sell the contract within the 5 days to other investors at $45,000. If we found an investor to buy, we will do an assignment contract to assign our interest in the purchase contract to the investor. We will make $10,000 in this scenario. • If no one is interested in buying for our price, we can cancel contract with seller or ask for a price reduction within the 5 days. After 5 days, you are committing to the property or risk losing your EMD (earnest money deposit).

9. Logistics of Wholesale Deal • Purchase agreement is signed with seller. Main terms listed in purchase contract are: • EMD (earnest money deposit) to show you are serious about purchasing. • Title company to use when closing the deal. Who pays the closing cost is also listed here. • Inspection period. This is the time frame you have to decide whether you like the house or not. If you cancel within this time frame, there is no negative consequences. If you exceed this time frame, seller can hold your EMD and try to sue you for breach of contract. • Cash or finance: we only do cash contracts because most of these houses won’t qualify for bank finance. *note: private money and hard money is considered cash since it’s not a traditional bank loan • Quick closings usually. You don’t want to delay a deal for 45-60 days when you can close on it within 10-14 days. Time kills all deals.

10. Logistics of Wholesale Deal • Once you get the purchase agreement signed, you will send the contract to a title/closing company (some states will allow lawyers to do closings) and also send the EMD • The title company will check title and liens on the property to ensure what you are buying is clean of any other fines. • While the title company is checking title and liens, you can actively start marketing your contract to other investors • Once you found an investor willing to buy within 5 days, you can then do an assignment contract: • Assignment contract is very simple. It just states that the purchase agreement between us an the seller is now being assigned to the investor as the buyer and all terms in the purchase contract stay the same. • The seller doesn’t even have to know you assigned the contract because the investor will honor all agreements made by you when you signed the purchase agreement. • After assigning the contract, you are legally off the hook for the purchase of contract. • Once the deal closes, you will get paid your assignment fee of $10,000. ($35,000 was the purchase price and we assigned it to an investor for $45,000)

11. Difficulties in Wholesaling • You are constantly on the hunt for a new property to purchase or finding investors who want more properties. • If you can bring one side of the equation, sellers or buyers, you can then network with other wholesalers and do deals in partnership. One markets for deals and gets purchase agreement signed and the other finds buyers for the deals and they split the assignment fee. • You have to constantly stay marketing for new inventory. It is considered active income so doesn’t give the tax advantages of other real estate investment strategies • But it allows you to build up capital quickly in a short amount of time to allow you to transition into other strategies.

12. How to Find Motivated Sellers • You are looking for people who are going through some issues in their life (most likely financially): • Foreclosure • Behind on property taxes • Behind on their HOA • Death in family or the owner died • Divorce • City Code enforcement fines • Fire/Flood Damage • Evicting Tenants • Going to prison or in prison • Senior citizens downsizing • etc

13. How to Reach Motivated Sellers Free sources: Paid sources: Direct mail PPC Facebook Billboards RVM (encourage no one to use this) TV Bandit Signs • Zillow for sale by owner • Driving for dollars • Cold calling (be careful of spam) • Door knocking • Calling all rentals • SEO • Find wholesalers who are willing to partner

14. How to Reach Investor Buyers • If you are wholesaling, you cannot market to sell the property since you do not really own it. You can technically only sell your interest in the contract which allows someone to purchase the property. So be very careful on how you market your properties for sale and make you sure comply with your state laws since it’s different in every state. • List on Craigslist • Zillow as FSBO (be careful as seller can see this and complain and cancel deal) • Network (meetups with other investors, REIA, etc) • Facebook

15. How to Learn More • Flip2freedom.com – great resource for wholesaling which helped me out tremendously when starting out. All the paid content is given for free in the podcast but may not be in the right orders. • Biggerpockets.com – another great resource. A big community with investors from all over discussing every aspect of real estate investing. Their podcasts were also a great help for me when starting out • LandAcademy.com – great program which talks about land only instead of houses

16. Q & A •  “Whether you think you can, or you think you can’t – you’re right” – Henry Ford