I recently attended The Big Live Event in Washington DC. By being part of the DC/NoVa Real Estate Networking Club, I was able to attend the 3 day event for free. Although there was an upsell for coaching, training, and tools, it was not pressured. I’ve captured my notes from the event and thought I’d share some morsels with you.
3 Essential REI Skills
When I started learning about real estate investing (REI), I assumed I should have a specific focus on what I want, yet a big takeaway from Phill is that you should focus on what they need by learning multiple strategies that can help the homeowner facing any of a number of hardships.
Phill outlined 3 skills that every investor must master or partner on:
- Marketing -this should take 85% of your time. Get those leads!
- Sales - convert those leads into transactions
- Strategy - Do not be a one trick pony. Listen to the homeowner and use a strategy that can help solve their problem
The takeaway here is that every lead is valuable. Ryan Deis suggests...
If you do not completely 'make money on every lead', eventually you will go out of business.
Rules for Buy and Hold
- Look for high migration areas = growing demand (people arriving > people leaving) Use haul.com took for quotes to/from locations
- Primary considerations: maximum appreciation
- Classic urban 3/2
- Below to average median price
- High migration areas
- Fixed supply areas (not near buildable land) - use google satellite view
- Secondary conditions FO cash flow
- Location, schools, amenities
- Competing rentals
- Build quality, maintenance projections
- What to buy
- City center (downtown) - expensive houses
- BUY AND HOLD Inner city - cheap (old) houses
- FIX AND FLIP Farther out - cheap land but expensive new homes get 2x money in suburbs
- It's all about the land - own the best land possible -own the inner city
- Don't compete with builders
When you are buying a rental, focus on the dirt, not the house.
Top 10 Investor Mistakes
- Buy new homes
- Buy in areas that will have more construction (who wants to buy an old home when they can buy new?)
- Buy in own neighborhood - bad leverage, bad cash flow
- Buy for price "great deal" in rotten appreciation area - discount doesn't matter
- Buy for cash flow in rotten appreciation areas
- Buy in areas with lots of other rental properties
- Buy for the "future potential" (urban crime area)
- Buy for "themselves" (personal preference)
- Buy based on advice from realtors rather than investors
- Buy too big or too small
Maximum Allowable Offer (MAO)
The concept of Maximum Allowable Offer suggests that you need to calculate what you are willing to pay in order for the deal to make sense (for buy and hold). Phil's formula is:
Maximum Allowable Offer (MAO) = After Repair Value (ARV) x 70% - minus repair costsFor those new to investing, be sure to create a repair estimate that includes 15% contingency.
Stretch Goal Number 1: 20K/month Passive Income
So Phill proposed a challenge that we first seek to earn 20K of passive net income per month. He argues that you can live comfortably with the following breakdown:
Job Replacement: 10K/month
1M mortgage: 8K/month
Vacation, leisure: 2K/month
Yes, it is a lot to digest. I was very skeptical going into the event because I knew there would be an upsell. But it did seem legit. Why work hard yourself to learn when you can copy a working method? What guru stories do you have? @gumshoeonline