Steve Cavanaugh

1. Steve Cavanaugh • Investor, Entrepreneur, Mentor/Coach, Musician • Investing in Real Estate since 2004 • Wholesaling • Rehabbing • Rentals • HML • Mentoring/Coaching/Consulting • Southern Maryland Real Estate Investors’ Group www.SOMDREIG.com • www.AskTheFlipVIPs.com Real Estate Investing Success Brainwash

2. How I Got Started • Worked IT job – one hour commute EACH way • Nine hour days • Hated work! • Read The Cashflow Quadrant • Read www.flippinghomes.com; Attended Steve Cook’s boot camps Real Estate Investing Success Brainwash

3. How I Got Started • Took inventory of my resources • Decided on a plan of action • Used resources to get into first real estate investment • Closed and Quit on same day! • Worked part-time local job for three years while I built my real estate business Real Estate Investing Success Brainwash

4. After 7 years of Investing • Comfortable income and net worth • No Debt! • Stay at home dad – work from home office • Security (in knowledge, not a J.O.B.) • Take four to six vacations per year – where I want, when I want, for as long as I want. • Rely on myself • Life revolves around my priorities and my family • “Quality of Life” Entrepreneur Real Estate Investing Success Brainwash

5. My Business Plan Today • Always have one or two personal rehabs going • Wholesale everything else • Purchase free & clear rental property • JV with students on their deals • HML with students • Keep an eye out for: • Bargain land purchases • Bargain Vacation property • Between me and my students, we currently have nine deals going (as of 4/25) Real Estate Investing Success Brainwash

6. “What’s Holding You Back? • FEAR • Financing • Not Knowing How to Estimate Repairs Real Estate Investing Success Brainwash

7. What’s Working For Me Today? • In the world of: • Wholesaling • Rehabbing • Buy & Hold • In the areas of: • Acquisition • Retail • Financing • Success Principles Real Estate Investing Success Brainwash

8. Acquisition • Generally, I am still using the 70% formula. ARV x .70 – Repairs = MAO *NOTE: • Conservative ARV based on NET sales prices and gut • “Fudge factor” built into repair estimate • I attempt to buy for less than 70% whenever possible Real Estate Investing Success Brainwash

9. My Typical Rehab Today • SFH • 4/2 • Built in late 1960’s – early 1970’s • Heavy Cosmetic Rehabs • ARV in the $220’s • Upper First Time Home Buyer segment Real Estate Investing Success Brainwash

10. Market Segments • First Time Home Buyer Segment • My area: Up to $220k’s • There is success in low – mid (ARV $135-150k) • Be careful • Why First Time Home Buyers? • Government incentives • They’re aware of the opportunity: Historically low interest rates & prices • Equity not there for trade-up buyers • What else exists in this price range? • Foreclosures • How do they compare to your rehabs? Real Estate Investing Success Brainwash

11. 24 Marshall Rd Purchased on 10/15/10 for $118,650 via REDC Auction Renovation: $37k Listed: 1/13/11 for $229k Sale: 3/15/11 for $233,500 - $7,500 subsidy = 226k NET Real Estate Investing Success Brainwash

12. 1018 Floyd Ave Purchased on 1/26/11 for $124,500 via MLS Listing Renovation: $43k Listed 4/21/11 Anticipated net: $225k Real Estate Investing Success Brainwash

13. FOCUS • Picking your Niche • What do you do well? • Do you have access to capital? • Do you have friends, family, SOI with access to capital? • Do you have TIME to make many offers? • Regardless of which path you take, the highest and best use of your time should be…? Real Estate Investing Success Brainwash

14. FINDING DEALS!!! • If you can find deals, you will ALWAYS make money in this business. Real Estate Investing Success Brainwash

15. Acquisition: What’s Working For Me Today? • One word = FORECLOSURES • REO Auctions • NOT Trustee’s Sale (“Courthouse”) Auctions • HUDs • Listed REO’s Real Estate Investing Success Brainwash

16. 2863 Lyon Ct. Hudson and Marshall Auction 125 DOM prior to auction Auction Status null & voids any open offers eBay style auction opened; I bid through their website… Real Estate Investing Success Brainwash

17. Initial E-mail Hudson & Marshall to me Mar 22 Attention Buyer,An offer has been made in your name to Hudson & Marshall on the property at (2863 Lyon Court Waldorf, MD 20602). Hudson & Marshall will process and submit the offer to the respective seller. Upon receiving a response to your offer from the Seller, Hudson & Marshall will contact you with information and next steps.We look forward to working with you on this transaction,Hudson & Marshall Real Estate Investing Success Brainwash

18. Counter… Hudson & Marshall to me Mar 23 Hi Steve, $103,500 was declined by seller.  What's your highest and best CASH offer? Real Estate Investing Success Brainwash

19. My Reply… Steve Cavanaugh to Hudson & Marshall Mar 23 Hello, My Highest and best CASH offer is $105,500. Thanks, Steve Real Estate Investing Success Brainwash

20. The Next Morning… Hudson & Marshall to me Mar 24 Please be advised that your offer on 2863 Lyon Court, Waldorf, MD 20602 has been verbally accepted. Once the contract is executed by the seller it becomes a binding agreement. As soon as Hudson & Marshall receives the fully executed contract, we will email a copy to you for your records. It may take up to 10 days for you to receive the fully executed contract.  You will also be able to download a copy of the fully executed contract through Agent Access. If you have any questions, please contact Hudson & Marshall. We appreciate all your efforts and for partnering with us to ensure success of the auction program! Thank you, (Hudson & Marshall Representative) REP@hudsonandmarshall.com Real Estate Investing Success Brainwash

21. Lyon Ct. Auction Debrief • The auction still had ~15 days to go, but they accepted my offer. • My MLS offer of $110k just four months prior was REJECTED! • In two days they had a signed contract overnighted to them with EMD. • ARV $215k • Repairs $45k Real Estate Investing Success Brainwash

22. REO Auction Companies • Hudson & Marshall • www.HudsonAndMarshall.com • Williams & Williams • www.WilliamsAuction.com • REDC • www.Auction.com Real Estate Investing Success Brainwash

23. HUDs – My Method • Have agent input bids daily • Fill out paperwork once • Investors can bid once status is “Extended” • 24 hour bid review period • HUD is going back and grabbing old bids • But, they are currently taking LOW offers • Examples… Real Estate Investing Success Brainwash

24. 11704 LANCELOT DR ARV $185k Repairs: $30k Purchase: $80k Real Estate Investing Success Brainwash

25. 44816 WOOD DUCK LN ARV $135k Repairs: $30k Purchase: $54k Real Estate Investing Success Brainwash

26. 12404 DEREK PL ARV $185k HUD’s appraisal in 11/2010: $199k AS-IS Repairs: Paint & Carpet What am I buying for? Real Estate Investing Success Brainwash

27. Analyzing a Market Using the MLS • How to check an area for investing activity • This process helps you determine: • What Investors are paying for inventory • What Investors are selling their rehabs for • What’s missing? Real Estate Investing Success Brainwash

28. Analyzing a Market Using the MLS • Step 1: Determine a zip code or neighborhood (even better) • Step 2: Run a search for all “Cash” sales from that area • Analyze these results for any consistencies (e.g. same buyers, streets, purchase price) Real Estate Investing Success Brainwash

29. Finding Cash Transactions Real Estate Investing Success Brainwash

30. Analyzing a Market Using the MLS • Step 3: Run a search for all sales from the past two months. • Look for the rehabs: • 20+ Pictures • Keywords like: • New Stainless Steel Appliances • New Custom Kitchen Cabinets • Granite Countertops • Ceramic or Wood Flooring • Etc… • Look at the Tax Record or Property History Real Estate Investing Success Brainwash

31. Analyzing a Market Using the MLS • Listing Status: • Sales = what HAS happened • Actives = what MIGHT happen • Pendings = what IS happening • Go off of Sales first • Look at Actives & Pendings next • Determining Comps = Part Art, Part Science Real Estate Investing Success Brainwash

32. Retail: Listing Strategy • Scenario: • Own/occ homes are on the market for $240k+ • Comps average a $10k seller subsidy (closing help) • You feel $230k is a quick sale price for your rehab • What do you list at??? • Let’s find out… Real Estate Investing Success Brainwash

33. Multiple Offers • Ever been through the “Multiple Offer Scenario” as a buyer? • Would you like to turn the tables and be on the other side for a change? • How would you like to have tons of showings and multiple offers within the first two weeks of listing your rehab? Real Estate Investing Success Brainwash

34. Selling your Rehab Quickly in This Market • Some Basics: • Convey EXTREME value = • Have the nicest house at the lowest price • Staging is a MUST! • Landscaping is a MUST! • Get buyer emotional about house Real Estate Investing Success Brainwash

35. The Conventional Listing Method • List high, have buyer negotiate you down • Make buyer request closing help • Make buyer request extras like w/d, home warranty • After an arbitrary amount of time (month, 90 days, etc.) drop price Real Estate Investing Success Brainwash

36. What’s Wrong with the Conventional Method? • High price doesn’t convey VALUE = Instant turn off • Most drop price when it’s too late • FTH Buyers browsing listings on the web are confused: • About asking for closing help, extras • About offering less than list price • Increased DOM creates stigmatized property • Doesn’t create an EMOTIONAL response in buyer Real Estate Investing Success Brainwash

37. My Listing Strategy • 80% of buyers find properties on the Internet • Most will be reviewing your listing at work • Must have nice pictures: • Staged, Landscaped • Compelling description: • “Green” Renovations • VERY competitive price • List early in the week (Mon, Tue or Wed) • Get buyers looking at pictures and getting emotional before they even get to the property. • Build anticipation for the first weekend Real Estate Investing Success Brainwash

38. My Listing Strategy • List BELOW solds and definitely under other actives. • Put in Realtor comments: "Please add closing on top of price.” • You’re saying: “We know this is a deal, here’s what you have to do now to get it.” (pre-negotiation) • Buyer is thinking: “This is a steal, and will be gone quickly!” • Further incentivize a Full Price Offer (FPO) by offering a w/d or a home warranty with FPO. • (FPO = You Netting List Price) Real Estate Investing Success Brainwash

39. When The Offers Come In… • WAIT! • Go on vacation! • Make yourself unavailable • Turn off phone • Don’t check e-mail • Talk it over with a partner …In the meantime, hopefully you get another offer… • Call for “Highest and Best” Real Estate Investing Success Brainwash

40. 800 Oxford Ct. Comps at $240k Customary subsidy of $10k Listed at $229k “Please add closing on top of price.” W/D with FPO 5 showings in first 6 DOM; Under contract on 6th day. Closed $237k less $9,300 subsidy = $227,700 NET PRICE Real Estate Investing Success Brainwash

41. How to Increase Your Effectiveness in the Future • Always ask these three questions of your buyers at settlement: • How did you find the property? • If Internet, where? ex. Realtor.com, mobile app? • What did you like the MOST about the property? • If you could change anything about the property, what would it be? Real Estate Investing Success Brainwash

42. How I’m Financing My Deals Today • Private Lenders • Small, Local Banks – Commercial Dept. • 10% vs. 6% + 1Pt + uncertainty of funding • LOC • Repairs, working capital • Always looking for JV opportunities… Real Estate Investing Success Brainwash

43. Keys to Success • What’s the Best Investment You can Make? • Don’t listen to Naysayers: • Parents • Relatives • Spouse • Employees • News • Only listen to those who have already done what it is that you wish to accomplish. Real Estate Investing Success Brainwash

44. Keys to Success • Take Action! • Speed of Implementation • Turn OFF the News! • Google if you must • Always get first hand accounts • Network • www.SOMDREIG.com • Continuing Education • Positive Thinking • Exercise

45. The SECRET To REI • PERSISTENCE! Real Estate Investing Success Brainwash

46. Where is Money Created? • Money is an IDEA! • If everyone in the world demanded their money be taken out of the banks at once, would there be enough? • Money is a number on a computer screen somewhere – it doesn’t all physically exist! • Do you have ideas??? • You’ve already made all the money you desire – now you just have to go out and realize it!

47. Money is an Idea • Profit is created when you put the deal together in your head. • TAKING ACTION* brings the realization of that profit into being. • *Unfortunately without ACTION your ideas are worthless.

48. “If you’ve been thinking about getting into real estate investing for more than 30 days, you’re no longer thinking about getting into investing, you’re thinking about reasons to NOT get involved in investing.”

49. Take Action! • Create a plan that fits you and your goals • Create little steps you can take • Break out of your routine • Make a call tomorrow! • The process will begin • Consider Mentorship

50. “It’s not that you can’t afford to get started with Real Estate Investing; it’s that you can’t afford NOT to get started with Real Estate Investing.”