Episodios

  • How To Make more Money

    How To Make more Money
    May 20 2025
    On today’s podcast episode I talk about how to make more money. I talk to some students at my real estate training events who are looking for ways to increase their income. Not everyone is interested in waiting years to build wealth and equity with rental properties. Some people are looking to make more money now. And that is what today’s podcast episode is about. Many new real estate investors are attracted to real estate investing and specifically wholesaling and flipping houses, because they are looking for an easy way to make more money. But I have noticed that these people who are looking to make more money usually have either a spending issue or an income issue. People that are looking for more income usually have a few things in common. They have too much credit card debt, may have student loans, have too many expenses, and not enough income to cover all of those expenses. The net result is a struggle to pay the bills every month. What we call the “rat race”. How do you get out of that struggle of living paycheck to paycheck? For some it’s a spending issue where they simply spend too much money relative to their income. For other’s it’s an income issue where they simply need to learn how to make more money. For most people it’s a combination of both too much spending and not enough income. And what is surprising is that I see this even with people who have relatively high incomes of $150,000 or more. People tend to increase their expenses as they increase their income. And that is what keeps them stuck in the rat race. Keeping up with the Joneses, buying new cars and nicer houses to impress your neighbors is a poverty cycle that will keep you broke forever. So how does one learn how to make more money? Is the answer to get a better job? Or is it to switch jobs or even get a second job? The answer lies with none of these. Instead what is needed in order to make more income is to gain specialized knowledge. A person working at a fast food restaurant does not have specialized knowledge and that is why they make $13 an hour. Anyone could do their job. Few want to. They have no specialized knowledge. The more specialized knowledge you have, the more money you will make. You need to learn specialized skills. A good example of a specialized skill is learning how to be a property scout or deal locator. We call these people “real estate bird dogs” in the industry. If I paid you $5,000 or $10,000 for every house that you found for me, then how many houses would you need to find per month to exceed the income from your job? The answer is not many at all. If you knew how to find houses you would have a specialized skill that could make you a lot more money than what you are currently making. If you become good at locating wholesale real estate deals at discounted prices, then getting paid to find these deals by an investor like me will make you a lot of money. Learning how to flip these deals to other investors for a profit is a specialized skill called “wholesaling” which can make you a lot more money than what you are getting paid at your job. It’s a specialized skill. And it’s a skill that you can learn. I teach this skill at the Wholesaling Real Estate Boot Camp. Learning how to buy foreclosures and bank owned properties is a specialized skill too. I teach this at the Foreclosures and Bank Owned Properties Boot Camp. Even learning how to buy rental properties at a discount and how to employ the Buy, Repair, Rent and Refinance Method is a specialized skill. I teach my students how to do this at the Buying Rentals and Building Wealth Boot Camp. These specialized skills will make you a lot of money because most people do not possess this knowledge. Regardless of your real estate investing strategy, whether you want to buy and rent, fix and flip, or wholesale and flip you need to know how to find deals. The more deals you can find, the more money you will make. And that skill set of knowing how to find deals is very valuable. Doctors and dentists, and other busy professionals that want to buy rental properties don’t have time to search for and locate deals. They want someone to bring deals to them. That is why wholesalers get paid so much to locate deals. The skill set of learning how to locate deals is a skill set that you can learn. I have taught over 7,000 students these skill sets at my real estate training events. Learn how to buy foreclosures and bank owned properties at the Foreclosures and Bank Owned Properties Boot Camp. Learn how to be a deal finder and get paid to find deals with my Real Estate Bird Dog and Partnership Program. Learn how to find wholesale deals at the Wholesaling Real Estate Boot Camp. Learn how to fix and flip houses at the Fixing and Flipping Houses Boot Camp. Learn how to buy rental properties and build wealth at the Buying Rentals and Building Wealth Boot Camp. These are all specialized skills that can be learned. If ...
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    30 m
  • Understanding the BRRR Method

    Understanding the BRRR Method
    Apr 29 2025
    On today's podcast episode I talk about the Buy, Repair, Rent and Refinance strategy commonly referred to as the BRRR Method. This is one of my favorite real estate strategies and one of the easiest ways that I know to create long term wealth with real estate. The Buy, Repair, Rent and Refinance Strategy was the method that I used to make my first million dollars in real estate. It has helped me, and many of my students become multi millionaires. Ironically, out of all the real estate investing strategies that there are, it's the easiest strategy to employ for a beginner and requires the least amount of effort. The BRRR Method consists of four components BUYREPAIRRENTREFINANCE BUY The first step is to find a rental property that would work using the BRRR Method. Your goal is to find a property that you can buy, repair, rent and refinance where all of the costs of the purchase and renovation of the property are covered. Once you locate a property, you purchase it using a loan from a private lender. I teach my students how to get private lender loans at my real estate training events. REPAIR The second step is to repair and renovate the property. We call this stage the "rehab" stage. Before you can rent the house to a tenant, you will need to make the property rent ready. How much work is required to make the property rent ready depends on the property. Some houses only need a new coat of paint and fresh carpets. Others require more renovation like updating the flooring, the kitchen, and the bathrooms. Some houses require major renovation like new roofs, central air conditioning, plumbing or electrical work. In some cases you may be able to buy a property that is already rented (with a tenant in place). In this scenario you can skip the repairs because the house is already rented and does not need to be repaired. However, usually, for the BRRR Method to work, you would need to buy the property at a substantial discount to market value. And that means that most of the time the property would require repairs. RENT The third step is to rent the property. You will need to have a tenant in place in order to be able to refinance your mortgage. The bank will want to see the amount of rent that the tenant is paying, and will want to verify this by getting a copy of the lease, and also by confirming that the rent is being deposited into your bank account. You would typically collect the first month's rent, last month's rent and a security deposit from the tenant when renting out the house. REFINANCE The fourth step is to refinance the mortgage to a lower interest rate fixed mortgage. In order to refinance the mortgage the bank will require an appraisal. For investment properties, banks will typically lend 75% of the appraisal value. A house that appraises for $200,000 would be able to get a mortgage for $150,000. The goal with the refinance is to get enough money from the bank in the refinance to pay off the private lender and to cover the purchase price and the repairs plus all closing costs and other fees like points, interest, and insurance. Done correctly, (like in the example I used in this podcast episode) you can buy a house with no money down using the BRRR Method. EXAMPLE On the podcast episode I spoke about a house that could be purchased for a purchase Price $80,000. Assume you could get a private lender loan from someone like me for $70,000. If this property required repairs of $30,000 and fees and points and closings costs were $10,000 then your total cost to purchase and repair this property would be $120,000. After the house was repaired, let's say you rented it to a tenant for $2,000 which is the going market rate. Now that the house is rented, your goal would be to refinance the mortgage so your mortgage broker orders and appraisal and the house appraises for $200,000. The bank is willing to lend you 75% of the appraisal amount which is $150,000. I recommend the 15 year fixed rate mortgage so that your house is paid off in 15 years (or less if you pay a little extra each month). You have to pay back the private lender loan of $70,000. You also want to pay yourself back the cost of the repairs ($30,000) plus the cost of the fees and points and closing costs from when you purchased the house ($10,000). In some cases you may have used Home Depot cards to pay for materials and you may have paid your contractor with a credit card. HERE IS THE BREAKDOWN Purchase Price $80,000 Private Lender Loan $70,000 Fees and Points $10,000 Total Cost $90,000 Repairs $30,000 Total Cost Including Repairs $120,000 Your Cash Out of Pocket (or credit cards used or a combination of both) would be the $10,000 down payment, plus $10,000 in closing costs, points, fees and insurance plus the $30,000 in repairs. The total cash out of pocket would be $50,000. This could be borrowed from a relative or friend or it could be a combination of credit cards, savings and Home Depot cards. APPRAISAL Appraisal ...
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    38 m
  • How To Buy Houses in 2025

    How To Buy Houses in 2025
    Apr 17 2025
    On today's podcast episode I talk about how to buy houses in 2025 and what to look out for as an investor when buying in today's market. The past 3 years have been an interesting time for real estate investors - especially in Florida. We have seen interest rates move up from a low of 2.65% in 2022 to above 7% by October 2023. This rapid increase in interest rates which was orchestrated by the Fed to reduce inflation had a very sobering effect on the real estate market. Prices peaked around July 2022 and have been on a gradual decline ever since. Over the past year, the market has shifted from a seller's market where it was easy to sell, to a buyer's market where buyers can be very selective. Sellers have been slashing prices on properties listed on the MLS and inventory has been rapidly increasing in many areas. In some areas like Southwest Florida, in some cities the number of listings on the MLS has quadrupled over the past few years. Some of the notable changes that have occured over the past few years are: Hedge Funds, Private Equity Funds and iBuyers stopped buying houses.These same hedge funds and private equity funds are now selling houses.Builders have had to slash prices and provide incentives to lure buyers in.Higher interest rates and prices means less buyers can qualify for a mortgage.Banks and mortgage lenders are becoming much more cautious on lending. So how have these changes affected real estate investors who are wholesaling and flipping houses, fixing and flipping houses, and buying rentals and Airbnb's? The first major change is you have to be very weary of sold comps (comparable sales). A house that sold 3 months ago may have gone under contract 5 months ago, and prices may have been ten percent higher. If you are planning on fixing and flipping and it usually takes you four to six months from purchase to sale, it may now take you longer to sell, and you may have to decrease the asking price. During that longer holding period, you will have additional interest payments. You may also be looking at an additional ten percent decline in pricing by the time the house sells. For investors that are fixing and flipping, they have a situation where prices are coming down and they may continue to come down. I recommend that you build in a profit margin of 10% from sold comps, and then add an additional 10% for potential price declines. This is a very conservative assumption, but it will help you stay profitable and out of trouble. It will also make you reject almost all deals that are presented to you. In this market you will need to buy at deep discounts. Keep an eye on home builders and the pricing of new homes because that is also putting downward pressure on comparable sales. If a brand new 1,800 square foot home that was built in 2025 is selling for $380,000 then why would someone pay $350,000 for your 1989 house that you fixed up which is only 1,200 square feet? Don't only look at sold comps because if you do you will over estimate the ARV and what the house could be sold for. Always pay attention to the home builders because their pricing puts a ceiling on comparable sales. If you are watching the builders, then you will know when they are slashing prices and you will be able to adjust your comparable sales and ARV accordingly. In today's market it is more important to look instead at current listings on the MLS than comparble sales. Pay attention to how long homes have been listed (days on market) and how much sellers are slashing their asking prices. Sold comps may tell you a house is worth $350,000, but if there are 3 houses listed for sale at $320,000 then ask yourself if you called the realtor and made an offer would the seller accept $310,000 or $300,000?. If the answer is yes, then the ARV today is $300,000 (not $350,000). And yes that is a shocking price decline. But it's also reality. If you are fixing and flipping, if today's ARV is $300,000 what will it be in six months? I recommend that you consider reducing your ARV estimate by an additional 10% to account for potential additional price declines and you run your offer price off of those numbers. If you are fixing and flipping be very conservative and buy at deep discounts! This means you probably will need to reject most deals that are presented to you. You won't find a great deal from a wholesaler who is marking up their price by $50,000 or $100,000. Also watch out for ARV estimates from wholesalers (they are probably too high). If you are wholesaling, consider that your cash buyer investors are the fixers and flippers described above. If they are buying deep, you will need to get houses under contract at deeper discounts in order to be able to flip them to those buyers for a profit. If you are buying at 60 cents on the dollar, you will not have a problem flipping houses. The days of paying 80% of ARV and flipping a house for 90% of ARV are over. Wholesalers will have less cash buyers to flip houses to because ...
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    43 m
  • Bidding on Online Auction Sites

    Bidding on Online Auction Sites
    Feb 11 2025
    On today’s podcast episode, I talk about bidding on online auction sites, and buying bank owned properties and foreclosures. In order to understand buying foreclosures and bidding on bank owned properties on online auction sites, it’s important that you understand the foreclosure process and how it works. I will be covering this in detail at the Foreclosures and Bank Owned Properties Boot Camp next weekend. You can learn more about the Foreclosures and Bank Owned Properties Boot Camp at the link below: https://www.lexlevinrad.com/foreclosures-bank-owned-properties-boot-camp/ There are 4 stages to foreclosure: Pre-Foreclosure Foreclosure Foreclosure Auction Bank Owned Property Pre-Foreclosure In the pre-foreclosure stage, the homeowner is late on their mortgage payments. They can be 30 days, 60 days, 90 days or 120 days late. According to the Dodd Frank Act, banks cannot pursue a foreclosure lawsuit until a homeowner is 120 days late so any homeowner who is late up to 120 days (or until the bank initiates a foreclosure lawsuit) is considered in pre-foreclosure. You can market to these homeowners by accessing 30 60 90 day late mortgage lists from data providers and marketing to these homeowners before they go into foreclosure. Foreclosure After the bank has initiated a foreclosure lawsuit (known as “Lis Pendens” in Judicial States like Florida), the homeowner is now in foreclosure. Foreclosure is public record and you can get access to this data by using data providers like Propstream (you can get a free 7 day trial at https://www.lexlevinrad.com/propstream/) Many real estate investors download the foreclosure list and market to homeowners in foreclosure by mailing postcards and letters. Investors can purchase these properties before the foreclosure auction directly from the homeowner. On new foreclosure filings, a foreclosure auction date has not yet been scheduled, but after a few months, a foreclosure auction date may have already been set. It’s very important to understand this and to know if there is a foreclosure auction date and what that date is. Any investor can buy the property for cash directly from the homeowner up to theoretically the day of the foreclosure auction. In reality if you were using a title company and you were going to do a lien search, you would want to close at least a few days before the foreclosure auction which means you would need to sign a contract with the homeowner no later than 3 weeks before the foreclosure auction date. Foreclosure Auction Investors can register to bid on the property at the foreclosure auction which is held online by the County Clerk in most counties. I do not recommend buying at the foreclosure auction since you are not guaranteed to receive free and clear title and the property may have liens and building violations attached to it. At the foreclosure auction, the property is sold to the highest bidder. The bank will have a representative who is usually an attorney who will bid up to or very close to the amount of the original mortgage that was owed by the homeowner. This is done to protect the bank's interest for the amount of the money owed. In the event that the bank is the highest bidder (because other investors don’t want to bid that high), then the property will go back to the bank. At this point the mortgage is wiped out and the bank now owns the property and it becomes a bank owned property. Bank Owned Property (REO) Once the property goes back to the bank it becomes a bank owned property or REO (which stands for real estate owned by the bank). The goal of the bank is to get rid of this property as fast as possible. They do this by only selling to cash investors. They do not allow mortgages because the bank wants a quick sale and does not want to wait to see if the house will appraise or if the buyer can get approved. The bank only accepts cash offers and requires all offers to have a proof of funds letter showing that the buyer has the funds available to purchase the property. We provide a proof of funds letter to all students that are in our real estate training program. The ideal buyer for a bank is an investor that will pay cash and waive all contingencies including inspections. Why is this ideal for the bank? Because the buyer cannot back out. There are no appraisals, surveys, inspections or requirements to be approved for a mortgage, so for the bank this type of offer is the one that is most likely to close and sell fast for cash (which is what the bank wants). Once the bank owns the property, they assign an asset manager in their loss mitigation department to oversee the sale of the property. This asset manager hires a few local real estate agents and requests a BPO which is a broker's price opinion on what the property should be listed for and what the current value of the property is. The asset manager then chooses one of these agents to be the listing agent and list the property on the...
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    34 m
  • How To Find Deals in 2025

    How To Find Deals in 2025
    Jan 16 2025
    On today’s podcast episode, I talk about how to find deals in 2025. The market has shifted and 2025 will be a big year for change in real estate. The Current Real Estate Situation Real estate prices are up by more than 50% since 2020. The 30 year mortgage rate has increased from a low of 2.65% in 2021 to above 7% today. Anyone who purchased real estate before 2020 is sitting on a lot of equity, and most likely refinanced into a very low interest rate mortgage. These homeowners have no incentive to sell. This is one of the main reasons why inventory has been so low. But what about homeowners that need to sell their house because they are relocating, downsizing, or for any other reason? What about sellers that have lost their job, are in foreclosure, have become sick or disabled, or are unable to afford their monthly mortgage payments? Sellers Are Delusional We have sellers like this calling our office every day. And I can tell you that in my opinion most of these sellers are in denial and delusional. They still think that their house is worth what Zillow said it was worth two years ago. However the reality is very different. In order to sell a house you need a buyer. And that is where the problem lies. At the current prices and interest rates, the average American can no longer afford to buy a home. So buyers wait, while sellers slowly start facing the reality that real estate prices in Florida have declined. Investors that fix and flip houses for a living are feeling the pressure too. Price declines means they may flip the house for less than originally anticipated. Refinancing from a hard money loan means higher interest rates and higher payments. Many of these fix and flip buyers are sitting on the sidelines waiting for deals to materialize. If you are buying fix and flips in this market, make sure you are buying deep. If you were buying previously at 70 cents on the dollar, build in a margin of safety and buy at 60 cents on the dollar now. I am seeing amazing fix and flip deals with damaged properties. Focus on that if you are fixing and flipping. If you want to learn how to fix and flip make sure you attend my Fixing and Flipping Houses Boot Camp. Increased Inventory and Lower Prices The inventory of MLS listings has substantially increased over the past two years. Sellers that are motivated to sell are slashing the prices on their listings. Foreclosures are increasing and I am starting to see more and more short sales and bank owned properties on the MLS and on online auction sites. Some markets have already had substantial price drops of 20%. There have been a number of negatives for real estate over the past few years including higher prices, higher interest rates, more inventory, rising property taxes, higher insurance and higher HOA fees. Where To Find Deals Sellers that are truly motivated to sell are facing a market with less buyers. A seller that is motivated to sell because of property damage, fire, flood, or hurricane damage is having a hard time finding a buyer. Some of these damaged properties can be purchased at a low enough price that makes sense for a rehabber looking to fix and flip or for a landlord looking for a cheap rental. Look for damaged properties. Short Sales Sellers that have lost the equity in their home, (which is anyone who purchased after 2022) who want to sell are having a very difficult time too. They are realizing that they cannot get enough from the sale of their house to pay their mortgage off. They have already lost their down payment and some of these sellers are simply starting to walk away. This is an opportunity for you as an investor to purchase their property at a discount by having the bank agree to a short sale where they accept less than the balance owed on their mortgage. I am currently working on a few deals like this that are short sales. They were all purchased at the peak of the market. Foreclosures and Bank Owned Properties I anticipate that as more negative equity homeowners walk away, we will see more and more foreclosures and short sales. Many of these homes will become bank owned properties that will be listed on the MLS and on online auction sites like auction.com, and Hubzu.com. This is why you need to learn how to buy and bid on bank owned homes. I will be teaching how to buy and flip bank owned properties at the Bank Owned Properties Boot Camp which is coming up in a few weeks. Buying Subject To The Existing Mortgage Homeowners that purchased at the peak have lost the equity in their home. But they may have a really low mortgage rate of less than 3% and they may be willing to let you assume their mortgage. There are literally thousands of deals out there where you can buy a house from a seller and assume the mortgage. Learn how to buy houses “subject to the existing mortgage” and you will find many deals like this in 2025. I teach buying “subject to” at the Creative Financing Boot Camp. Seller Financing Older ...
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    45 m
  • How To Buy Bank Owned Properties

    How To Buy Bank Owned Properties
    Dec 3 2024
    BUYING BANK OWNED PROPERTIES On today's podcast episode I talk about buying bank owned properties. This is an important episode because pre-foreclosures and foreclosure auctions are sky rocketing in 2024, and many of these foreclosures that we are seeing now will ultimately end up as bank owned properties. It is important for you to understand how the foreclosure process works in your State so that you can better understand how many of these foreclosures will become bank owned properties and the timeline of how that happens. Typically, when you have not made your mortgage payment for 120 days, the bank can sue you and initiate foreclosure proceedings. But there is a substantial backlog of people who have not made their mortgage payments who are still not in foreclosure because the bank has not pursued a foreclosure filing yet. No one knows how many of these properties exist but an inside source that I have at one of the largest lenders tells me that it is a very substantial number. So anticipate many more foreclosures. Another thing to note is that now that prices have declined, there are many homeowners who purchased a property in 2022 or 2023 that have lost their down payment and lost the equity that they had in their home. Some of these homeowners may even be negative equity, meaning they could owe the bank more than what they can sell their property for. In situations like this, people have less incentive to keep paying their mortgage when there is no equity in their home. Add to that financial hardship like a job loss or a disability and it's easy to see how many of these homeowners will simply walk away and stop paying their mortgage. Every one of these properties will ultimately be foreclosed on and end up as a bank owned property. This is why you need to know how this process works and how to bid on these bank owned properties. Real estate prices peaked in Mid 2022 in most areas. Since then, prices have declined quite substantially. This has become a real problem for many homeowners. As an example, if prices are down 10% year over year, and you purchased a property for $500,000 one year ago, and you put 10% down you would have had a $50,000 down payment and a $450,000 mortgage. But now with prices down by 10% your house is only worth $450,000, which is the amount that you owe the bank. Even worse, if you were to sell your home for $450,000, after paying commissions and closing costs you may only net $405,000. So you effectively have no equity in your home and are actually negative equity. This is what has been happening to many homeowners over the past 2 years since the peak in 2022. If this homeowner has a low interest rate on their mortgage and likes their home and still has their job then they will most likely continue to make their mortgage payment. But you must understand that they will feel way better about this decision if their property had gone up in value since they purchased it. And if they have any type of financial hardship like divorce, job loss or a disability, then if there is no equity they will be more likely to stop paying their mortgage and walk away. Previously, lower interest rates helped because a home owner was able to refinance their mortgage and pull money out of their property. Because interest rates had gone down, and the value of their house had gone up many homeowners were able to do cash out refinances where they kept the same payment. But now the inverse is happening. Interest rates have gone up, and the value of their house has gone down. So they can no longer use their house as an ATM to refinance and pay off their credit card bills. With no equity, and a financial difficulty, you will find more and more people that will start walking away and will stop paying their mortgage. This will add even more to the number of foreclosures. And all of these foreclosures will end up as bank owned properties. As an investor, you can bid on and win the auctions on these bank owned properties. In some cases you may be able to buy a bank owned property for 60 cents on the dollar (or less). As an investor, you want to make sure that you have this strategy in your toolbox. Regardless of whether you are looking to buy your first rental property, your first fix and flip property, your first Airbnb or your first Wholesale flip, understanding how to bid on and buy properties on online auction sites will help you find better deals at better prices. Banks are not the only sellers. Government entities like Fannie and HUD that insure mortgages are required to buy back those mortgages if the homeowner defaults on their mortgage payments. These Government Entities have their own websites that they use to post these properties for sale. You can bid on these government entity sites and bid on Fannie Mae Homes, Freddie Mac Homes, and HUD Homes. However these sites will require you to have a real estate license to bid. For this reason, I always recommend to my students that they get their ...
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    34 m
  • Buying Houses Subject To the Existing Mortgage

    Buying Houses Subject To the Existing Mortgage
    Nov 12 2024
    On today's podcast episode, I talk about buying houses subject to the existing mortgage. This investment strategy is also known as "assuming the mortgage" or buying "subject to". As prices have pulled back around 15% from the peak, many sellers are realizing that they will not be able to get their Zillow estimate if they sell their house. There are a lot of people who purchased houses 3 years ago when interest rates were as low as 2.5% or 3% (on a 30 year fixed rate mortgage). Today the rate is 6.5% which is more than double what the rate was just 3 years ago. This has created an opportunity with many motivated seller leads where sellers are calling us and trying to sell their house. As an example, let's look at one of the leads that called my office recently. This was a young couple who had purchased their house for $225,000 a few years ago. They had put down $25,000 and their original loan balance was $200,000. Their interest rate was 3%. The interest component on their 30 year mortgage was a monthly payment of $843. With taxes and insurance the payment was $1,443. This seller was trying to sell their house and had it listed on the MLS for $250,000. This is what Zillow said the house was worth. However the house had been listed for over 90 days and other than a few low ball offers from wholesalers, there was only one real legitimate offer for $225,000. You may be wondering how I got in touch with this seller. I reached this seller by mailing a postcard campaign to a list that was NOT motivated and was just a broad mailing to all of the 3 bedroom, 2 bathroom home owners in this specific city. Not all sellers that are motivated to sell are on a motivated seller list. There are many sellers who may be paying their mortgage payments on time, who are not in foreclosure and who appear to have no distress at all. But some of these sellers really want to sell their house. Their motivation to sell as soon as possible makes them a motivated seller. In this scenario, this young couple had moved to Florida from the Northeast during the pandemic when they could work from home. Now a few years later, they want to sell their house and move back home to the North East which is where they are from. Zillow says their house is worth $250,000. That is the amount that they listed their house for, but all they have received is a bunch of low ball offers at around $200,000. They also received one potential offer of $225,000 but their realtor was concerned the buyer would not qualify for a mortgage. I asked them why they don't lower the asking price on the MLS and they said that they were sick and tired of showing the property every weekend and just wanted it sold. They were reviewing that one offer that came in for $225,000 but they realized that after paying the commission and closing costs, they would not be making any money from the sale and would be walking away and simply paying off the loan. They were looking at a scenario of maybe netting only $5,000. Even worse, they did not think the buyer would qualify and they could not afford to pay for any repairs that would be required after the inspection. They had discussed this scenario and were trying to figure out how to get a better offer or a little more. That is where my postcard came in. And that is what prompted them to call me. Their mortgage payment was $1,443. If I were to be taking over their mortgage payment that is what I would be paying per month to the bank. Market rents in this area are around $2,000 per month. It's in a desirable area where there are many potential renters so it would be easy to find a tenant for $2,000. The house may even rent for $2,100 or $2,200 with some new paint and a cosmetic clean up. So the first question I asked them is "why don't you rent the house out"? This is a key question to ask because it puts the seller on a footing where they start wondering why you are not interested in their house. Why would you advise them to keep it instead of buying it yourself? This is a great question to ask a seller. Their answer was that they did not want to be landlords. I told them that there was no way I would be willing to pay $225,000 cash for this house. The only way I would possibly consider buying their house would be if I were taking over their mortgage payments. This is called buying a house "subject to the mortgage" or "assuming the mortgage". This is known in legal terms as a "quiet assumption" because you are not telling the bank that you are taking over the mortgage. My offer was $5k cash and I would take over their mortgage payments. This scenario is very common because anyone who purchased 3 years ago when interest rates were really low, is looking at a price decline of 15% from what they paid for their house. So they are finding that their house is not as easy to sell for what they originally wanted to get for it. The reason for this is because while prices have pulled back, interest rates have more than doubled ...
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    25 m
  • Fixing and Flipping Houses For Beginners

    Fixing and Flipping Houses For Beginners
    Nov 4 2024
    On today's podcast episode, I talk about fixing and flipping houses and understanding how fixing and flipping houses works. When you want to fix and flip a house, before you get started it is important to understand who you are selling the house to. I always teach my students to look at a fix and flip in reverse - meaning understand who you are selling the house to first. Your biggest pool of buyers are going to be first time FHA buyers. Those first time home buyers are buying a home with just 3.5% down. The demographic of a first time home buyer is a couple looking to move from an apartment to a house. The average age for an FHA buyer according to FHA is 31 or 32 years old. The next thing you need to look at is affordability. A lot of beginners mess this up because they figure if they are going to be fixing and flipping then they may as well go for a higher priced house with bigger profit potential to make as much money as possible. I don't advise that you do this, because as you go up in price point there is a lot more risk. If you want to make $40,000 or $50,000 on a fix and flip, then fixing and flipping just two houses per year could replace your job. The type of fix and flip you should be focusing on is the entry level bread and butter homes that are affordable. You should understand that these are the types of homes that first time home buyers are looking for. If you are fixing and flipping houses to first time home buyers who your potential buyers are, and what they look like is all about affordability. The median household income in the U.S for a couple is approximately $70,000. Mortgage brokers say you should not spend more than 30% of your gross income on your mortgage so that works out to be around $22,000 per year. Let's round that up to $24,000 per year and that means that the average couple with the median U.S household income can afford a $2,000 per month mortgage payment. Imagine yourself as that buyer looking to buy a house with a $2,000 monthly payment. Use Google's free Mortgage Calculator, and calculate what the house price would be with today's 30 year fixed rate mortgage rate that would result in your having a mortgage of $2,000 a month. Maybe they can afford $2,100 or $2,200 or even $2,400. This is the price range you should be focusing on. This affordability issue is very important to understand. That is why you should look at in reverse focusing on your buyer (not you). As you go up in price there are less people that can afford a home. There are way more people that can afford a $500,000 home versus a million dollar home. And there are a lot less people that can afford a $500,000 home than a $300,000 home. Many people simply don't earn enough income to be able to afford a higher priced home. So if you are fixing houses to flip or sell to other people, then consider where your biggest pool of buyers would be. When you look at it this way, you realize how important affordability is. So the first thing you need to understand if you are looking to fix and flip houses is affordability You need to focus on finding a neighborhood or city or target market where houses are more affordable. Based on current 30 year fixed mortgage rates, A couple earning the median income of $70,000 per year can afford a home that is priced no higher than $250,000. You may live in a big city where prices are quite a bit higher than that amount. But if you move away 30 to 45 minutes, in most cities you will find other neighborhoods that are more affordable that are not as close to downtown. Imagine you are the buyer and ask yourself this question. If I made $70,000 a year, where could I afford to live? You may have purchased your home years ago, and it may have increased in price substantially so you may view your neighborhood as affordable. But what you need to understand is a new buyer, buying today is looking at today's prices (and today's mortgage rates) not what you paid. So a neighborhood which may have been affordable ten years ago is no longer affordable today. So the key question is where can they afford to buy based on their current income? Affordability goes hand in hand with understanding where people are moving to. You can look at demographic data from the U.S Census Bureau and companies like U-Haul that provide moving data to analyze where people are moving to. You are looking for cities that are growing, that have population growth, and that have job growth. For example, in the State of Florida, according to U-Haul more people are moving to the Melbourne, Palm Bay area of Brevard County than anywhere else in Florida. If you wonder why, look no further than affordability. People will move to places that are affordable where there are jobs. These places are growing. The Space Coast of Florida is a perfect example of this. It's more affordable than South Florida, the population is growing, and there are many jobs being driven by employers in the Aerospace Industry. So based ...
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