How Do I Know If This Is A Good Real Estate Deal?
How do you actually know if you’re
looking at a good deal on paper that may be in reality is not a good deal? Today,
I’m actually going to be sitting down with Lori. She’s got a deal right now and she
wants to know is this a hot one or is it a flop. And today, I’m going to break it all
down. We’re going to show her how to like read the numbers. Understand what they
really mean. And we’re going to find out right now if she’s on the right track or
if she’s just like this close an inch away from making the biggest financial
mistake of her life. Hey are you doing? It’s so good to see you.
How are you doing? -Good. I’m excited. -Why are you excited? -Because I want to get into this house. I
want the home. I want a home. I really want to get to the real estate. So,
this is good. -Yeah. How long have you been wanting to get into real estate though?
-Oh, for years, I’ve loved it. I’ve just never… You know, you’ve given me the
opportunity to try something that I have a little more. What’s the word? Oh…
Security. -So,when you came to us, you came to me and you basically…
You went through the whole process. We’ve gotten you under contract. And at this
point, you can move forward on faith saying, “Okay. Everything sounds good” but I
know you’ve asked a couple of times. “Kris, are you sure this is like… How can I really know?” I’m like, “You know what? The best thing I can do is invite you come into the office. I’m
going to introduce you to the man that runs my entire acquisitions team. And we’re
actually going to dissect this property and really find out if this is a hot one or
if it’s not.” And something just happened in the last couple of weeks that we
found out that I think you should know about. So, we’re going to go be Tyler Bennett.
Director of acquisitions and we’re going to get to the bottom of this. Alright,
Tyler. Thanks for being here. I want to introduce you to Lori. -Hi, Lori. -Hi, Tyler.
-Tyler Bennett. Nice to meet you. -Here pull out a chair. Her son was watching me
forever on YouTube. -Yes. -And then my wife and I… It was just kind of funny
how we all kind of met each other. But I’ve had a chance to meet Lori and her
amazing husband Brent. We actually shot a video about their game plan about like,
“Well, what do I do?” And I was like, “You got good news.” Like, you guys have the ability
to crush at real estate. But like any smart person, she’s texting me a few
times I think with positive nervousness. And that’s because… Listen, we have so
many tons. -And a few times I’ve done it on my own has failed.
-Yeah. -So, that’s why I just want to make sure that I’m doing it again with
somebody who has the expertise that I didn’t have. I don’t have to relearn the
system and that’s why I asked him. “Are you sure?” -Before we dive into this
property, I’m going to put up here on the big screen. I’m going to have Tyler
dissect it. His team researches thousands of
to find winners. My question for you is what do you feel like in hindsight went
wrong on the other deals that did not work out? -The most recent flop was I had
rented it because I was a teacher, so I rent it to another teacher. And they
destroyed the property. -So you have bad property management? Were you property manager?
-I was the manager. I knew of her. And then I got
3 in a row that I had to keep going back. And so, the third time I finally got
a property manager, I said, “Okay, I’m going to invest in this.” And I got a property
manager and he did great. And those people also, they didn’t trash the house
but they… We left some things in the house like this the porch swing things
like that. They took off with the stuff we left at
night one time and just left. So, it wasn’t so great. And that’s why I believe
totally in 100% now I would never do it myself again. I’d always get
a property manager. Now, it’s just more of just a cash flow. -And truthfully, a
lot of it was you just… You didn’t know what you don’t know, right?
With screening process, the background checks, pay income verification, rent
history. -And you get you get panicky. I didn’t had the time have the Sleep Well At
Night fund. So, I’ve got a little panicky. And I want to hurry up and get this
rented. “Well, okay, let’s get that rented!” And so, I thought, “Okay, I don’t…” I didn’t do a
huge background check. But thought, “She’s a teacher.” -And you start cutting quarters
without knowing that you’re tell you them because you’re inexperienced. -Exactly.
-Yeah. So, listen. Here’s what you’re going to find out, Lori. I remember even on my
first 50 homes, I was still making some of the classic errors because there’s a
level of expertise to know how to run that side of it. But that’s just even a
small part. I mean, you were doing real estate in your backyard. And right now,
we’re going to show you the extreme opposite. Right now, you’re
sitting in one of the hottest markets in the world right now. And most certainly
in America. And some things have happened just as getting another contract.
We know you’re only a couple of weeks away from closing. But Tyler’s here to
actually share some surprising news with you that we think you need to know about.
And also just help you understand… -Do I want to know about it? -Yes. [Laughs] Well, one of the reasons we
really like the Orlando Central Florida market is because of the influx of the
55 plus. You have all these baby boomers that are retiring. And many of them are
attracted to Florida, particularly Central Florida. The weather’s great. Many
of them are coming from States, New York. Boston, Pennsylvania, New Jersey. This area
of the country where (1) it’s cold, (2) state income tax, property taxes, property
values. It’s just a lot more expensive to live up there. And it’s cold. What they do
is they’re retiring. They’re converting their 401Ks and IRAs are starting to
take income from them. And they come to Florida where there’s no state income
tax, they use salt for margaritas instead of the melt snow. And they they’re
attracted to Central Florida because the prices are really strong. And this
particular crowd isn’t necessarily going to the beach laying out all day, right?
They want to be on a golf course around the country clubs and just have a nice
comfortable lifestyle where their dollars go further. And so,
where we’re at right now with your house in particular, we’re benefiting
from this massive inflow of all these different people. This is just a little
bit of what’s going on in the market. And then we’ll talk specifically about
your house. A couple things in the market. I call them tail winds and headwinds. So,
finishing up 2019, coming into 2020, what’s happening. We always have a very
strong labor market. There are actually, right now as we film this video more job
openings than adult humans to fill them. That is very, very unique. That doesn’t
happen very often. U.S earnings growth and net margin. So, companies are making a ton
of money. And the reality is the stock market is up and everyone’s
hesitant to continue to invest in that in the market. But the actual price that
we’re paying for these stocks, the price per
earnings is historically in our favor. In other words, stocks could be up higher
based on the amount of money companies are making. Global economic activity
is moving back higher. Low interest rates. Interest rates are historically
low right now. Liquidity, cash is everywhere. The balance
sheets of the average U.S citizen are stronger right now than they have ever
been. And people are sitting on cash. I think a lot of them are a little
hesitant about what’s going to happen. It’s an election year and so there’s just…
There’s cash everywhere. Companies are sitting on more cash than they
historically have ever sat on before. And then you have a strong housing market, of
course. Some of the headwinds. What concerns that we potentially may have.
Trade tensions and tariffs. Just recently, we’ve made a lot of advancement and
eased a lot of the tension with China. But that is still out there. The election
uncertainty. That is there. It’s an election year. Valuations are moving
higher. Itchy trigger fingers. Just today, people got out of the market because it
was up and they sold and so we have people doing that. Chinese economy,
European zombie banks. We have literally up banks with negative net worth. They’re
just being supported by the central european banking system.
But there’s a lot of positives right now in the market. Let’s look at how that
ties into your property. -So, this is actually pretty exciting. So, you
recognize this Performa, don’t you? So, this is the house that you have on the
contract. It’s a sweet house. It’s a 1,300 square foot home built in this year.
There’s a 3-2 home. This is what’s crazy: In this particular area, it’s 155,000 in ocala. And ultimately, the total property investment
for this one is very low for it –for Florida. Here’s what that’s translating
to. What I tell you that we found you, like, all of my deals are always amazing
good. But this particular deal, it’s like wow! This one… Well, let’s just look at it.
You know how to read the numbers. You know about all of this. I always jump
down to this part right here. Which is my cash on cash. Florida, how how often Tyler
do we see a Florida house with a cash on cash over 10?
-Hardly ever. -It is rare. Cash on cash is really high. This is
what’s bizarre. I have never seen a 4-0 ever in that particular market. But Tyler, what’s happened even since getting this under contract in this neighborhood?
-The Builder, this is a new build. Has increased the price is about $10,000 on
this exact house. So, by the time you close, that same… The next-door
neighbor’s house is selling for at least $10,000… -If I bought 100 more of these, I would, just not all in the same neighborhood. Because
there’s only a certain percentage we want to own in particular areas. I can
ask that. This right here is just. It is just a screaming winner from head to toe.
So, in the economy everything is 100% moving in this direction. But this is a
house that I will buy again and again and again and again and again and again.
It’s just a sweetheart deal. It’s awesome. -Because even though 165, it’s a great deal.
-Now, what questions do you have about the information Proforma, where
we’re at in the process? I know we’re set to close in just like a few weeks. So… -You know what? I don’t know that I have any questions. You sort of answered one. I was
going to ask. I know we have to do one at a time
because I don’t have a job again. So, you would never just buy it a bunch of those?
-What I mean is Tyler has very specific rules and our acquisitions
team and our SOPs about how many homes. Like for example, if there was an entire
neighborhood for sale of that exact property, we wouldn’t buy them all
because that entire market would become a transient rental market. And ideally,
you’re looking for having a certain distribution of homes that people live
in and own versus rentals. So… -But are we buying other houses that are looking
similar to that? Absolutely. -Okay. -Yeah. -I was going to say that looks so good. -Yeah. -I would like
that again. I’m just going to double it, right? -One question I have for you is do
you understand how the property management transition process works? -That’s a good
question. -Yeah. -Yeah. -It’s going to come up in about a week or 2. -Because I know that
there’s some things that you want to do to the property to get it rental ready.
And so… And I want… But I want rented right away as well. So, we want to get
that moving quickly so that when we are done, we have a renter moving in. Right? -We want to
also have super like realistic expectations. So… -Yeah. -This home, they rent
on average in about 4 weeks. Certainly helps that it’s new. That’s kind of
standard. I just recently had a home with one of my partners it took 4 months.
And that’s like a one in a 200 home thing. But that’s what we have the sleep
well at night account where it like, it’s not likely… It’s actually super remote.
But we’re still prepared for it. But no, I think this home is actually going to rent
out in our typical timeframe. -Yeah. -That’s what we always shoot for 4 weeks. And then
we just setup on autopilot and then immediately go after the next house. -Our team
goes in there. The second that you close, we go, we get the keys, we rekey it. Any
rent ready repairs… Yours is brand new. Sometimes on brand new houses, we still
need to go in and put in blinds or do this. All of that is already in place. So,
the second you close, we move in there. Work done. Typically under a week, it’s on
the market for rent and then we have that target of that 4 week-ish.
-So, now, do you have to wait until everything has done? And before the
property manager starts… -Correct. We can’t mark it up for rent. Because we don’t own it. -Not that. That week that we’re doing all the stuff. -It depends on that list is. Right? For your house,
yes. Because it’s new. It’s still going to show really, really, well. If it’s an existing
house… So, we want to go in there. Repaint, do some things then we’re going to want to
wait for somebody to come through when it looks good.
Good questions. -Yeah. Because I just think I was the quicker we get it moving. Because
it’s quicker we can get it going, then the next we can do the next one faster.
But remember, we’re not going to sacrifice time for quality. -Right. -So,
we’re going to always, always there on waiting an extra week. Or taking $25 less than maybe the peak market rent to get the right tenant
in there. You know, that’s going to pay on time. It’s more likely to renew it the 12
months and all that different criteria. -Yeah, that’s great. Yeah. -Tyler, does this
home… Do you know in in Lauri’s situation, if the home has to be rented before they
can get the next one on a contract? Or the moment it’s that purchased, can they
start getting under contract? -For her situation, it needs to be rented so that
she’s offsetting that new debt that’s on her credit. -Yeah. -And so you
become stronger and stronger because the rent is more than the mortgage. So, you
get better and better as you go. -That’s why I think was we had our income was
the issue. -Yeah. -But by the end of the que one, I mean we’re in the middle of
January. So, in March, hopefully we’re looking for
houses again. -Yeah. -I’m so pumped for you. I’m excited. I just… I
wanted… I just wanted to press the flesh and get really face to face have you sit
down with Tyler and just see. This deal, I mean we can show you all the other deals
that we’re doing right now. And frankly, any time we’re sitting between 28 and a
32 percent ROI. I know we’re freaking banging. We’re killing it. And we’ve got
something more than. Considered lucky. That’s not the expectation becuase I don’t know if we’ll ever meet again. It’s hot. It’s hot. -I’m going to try to have that expectation, right? -Well, congratulations. And super excited for you. -I am, too. I’m really excited to get going. -I know. 4 or 5 houses. 6, 7, 8, 9 months
from now and that is a good 2020. -That’s the goal. -Awesome. You know, it’s weird. I sometimes
sit down with people, they don’t know exactly what they have. But I do because
I’ve done this so many times. And you know, you should have confidence when
you’re buying a property. I always telling people, “When you’re doing this on your
own, you want to make sure that you’re at least sitting at a 20% ROI.” If you
don’t know how to do that, my lease option class showing you how to do it in
the backyard is a total possibility. But this turnkey stuff hitting 40%, it’s
mind-numbing. It’s nuts. And it’s honoring money. It’s letting
money work for you. It’s creating maximum leverage. If you want to know how to get
your hands on deals like that, like the ones that I’ve been showing you in these
videos or today’s video, do a couple of things: Number 1, subscribe because I
want you to be like up-to-date on exactly what’s happening in the market.
Number 2, I want to make sure that you know that there’s a link below. You can
talk to a member of my team and say, “Hey, this Kris having the excess deals. Or
does he have any opening spots for partnering?” Because I only bring on as
many partners as I have access deals. We have some right now. It won’t always be
the case. But if you’re sitting there thinking,
“Well, Kris…” Whether I do or don’t have money and I want to get in the game,
click that link talk to my team and a couple of things will happen. One, you can
learn about partnering with me. 2, you can actually access that document for
free that actually shows you my track record and exactly how I produce a 40% ROI even though it’s typically 25 to 32 percent. So, my
friends, thank you so much for watching today. Subscribe. We’ll see you tomorrow.