Phill Grove's Big Live Event

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:

  1. Marketing -this should take 85% of your time. Get those leads!
  2. Sales - convert those leads into transactions
  3. 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 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
  • Discount
  • 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

  1. Buy new homes
  2. Buy in areas that will have more construction (who wants to buy an old home when they can buy new?)
  3. Buy in own neighborhood - bad leverage, bad cash flow
  4. Buy for price "great deal" in rotten appreciation area - discount doesn't matter
  5. Buy for cash flow in rotten appreciation areas
  6. Buy in areas with lots of other rental properties
  7. Buy for the "future potential" (urban crime area)
  8. Buy for "themselves" (personal preference)
  9. Buy based on advice from realtors rather than investors
  10. 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 costs
For 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
Total: 20k/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

Rich Dad Training

On January 3-4, I started the new year by attending a Rich Dad online webinar. For those unfamiliar with Rich Dad Poor Dad, the author tells the story about he learned to become an entrepreneur focusing on building wealth through passive income. It cost me roughly $100 for 5 hours of live remote training, specifically about strategies for real estate investing. Was it worth the price? Absolutely. For roughly $20/hr, you really cannot beat the cost.

The following are some of the key takeaways that I learned:

  • In order to win, you must use a proven system. The presenter argued that the pieces of this system should include education, tools of a pro, capital / credit, a "power team", and a mentor.
  • Look for markets appreciating 5% growth year after year for 10 years
  • Get your money back in 12-24 months
  • You have 90 days, then you are out. Investment should not take longer. Time is money.
  • Invest in real estate for cash flow first.
  • Own nothing and control it all (first and fast). Sign an agreement immediately. Can always back out.
  • Help people and the money will come
  • You should earn $3000/hr
  • Be comfortable about being uncomfortable (offering low)

Further, the presenter challenged us with the following goals for 2017:

  • Work 3 hours/week on this business
  • Achieve 2 wholesale deals
  • Purchase (and sell) 3 foreclosures
  • Transact 1 lease option/month
  • Purchase 1 Mobile home park or multi-family

So, it's now almost February, so I have my work to do.

Gary Keller's Seven Things

One of the first books I've read on the subject of real estate investing is The Millionaire Real Estate Investor. The section entitled Think a Million resonated with me and I wanted to document my summary of Gary's seven points:

  1. Think powered by a big why – What are the things in your life that motivate you the most? Do not focus on short-term sources of motivation. Think of the big picture. Are you motivated to achieve financial freedom?
  2. Think big goals, big models, big habits – We tend to set the bar too low in terms of goal setting. Big goals are specific measurable targets that meet the big why. Big models mean we should learn and execute proven systems nd strategies for reaching your big goals. Big habits are the daily consistent actions and choices that result from following the big models.
  3. Think money matters – You can work for money or have money work for you. The goal of Gary's book is to get you on the path to passive income as quickly as possible. Change your thinking from being a consumer to being an investor.
  4. While investors see money as an opportunity to invest, consumers see money primarily as an opportunity to spend.
  5. Think net worth – Net worth is your capital minus your expenses. As a general rule, investing makes your net worth go up and consumption makes it go down. How much faster would your net worth grow if you owned more real estate? How fast would it grow if someone else was paying down the mortgage?
  6. Think real estate – The US government rewards real estate investors with such benefits as allowing for real estate to be deductible, depreciable, and deferrable. The tax system rewards this behavior.
  7. Our research and experience show that no other investment has had as consistent and powerful an effect on the average person's net worth as real estate ownership.
  8. Think value, opportunity and deals – Look at a lot of real estate. The more you look at properties the more your sense of value becomes accurate and internalized.
  9. Think action – Once you understand true value, take action on the deals. There comes a point where too much analysis leads to paralysis. At some point you need to jump in, get started, and learn while you invest.

The last point is something I still need to determine. By nature, I am the person who analyzes every situation, often dragging my heals and missing opportunities. My wife, on the other hand, is more impulsive. There likely needs to be a healthy balance there. So, what do I need to learn? A lot. When will I be ready? I do not know. Perhaps first I will determine how to move 401K monies into a self-directed 401K so I can invest in real estate, then work with a turn-key solution to get my feet wet.

What motivated you to finally pull the trigger? – @gumshoeonline

Joining a Community

Yesterday I attended my first networking event aimed at real estate investing. I had previously reached out to Joe Arlt via LinkedIn because I saw that he was local and referenced in the The Millionaire Real Estate Investor. I was hoping to find a mentor. Instead, he invited me to a networking event that he organized.

Joe runs both the DC and NOVA real estate investing clubs. Since I had read about his success, I decided to attend. Although somewhat skeptical, these clubs seem to be legit. I did spend $100 for a 1 year membership, but considering there is a meeting per month, I see it as dues to help Joe offset costs for renting the hotel conference room. In addition, Joe offered, for the price of the club membership, free tickets to attend what is called The Big Live Event.

During the night's agenda, Joe started by playing a video from Phill Groves, who appears to be a credible real estate investor and educator (YouTube channel). He runs the Big Live Event and sells education and software. He emphasized how critical it is to market and find leads.

Spend 85% of your time marketing and looking for deals.

The biggest takeaway from Phill's video is that investors should not focus only on one method of investing. Instead, he argues that the seller's problem should dictate the strategy. So, I would take it a step further and argue that we need to have empathy for sellers. Listen, really listen to their problems so you can find a win-win solution for all.

Successful investors seek to solve the seller's problem with creative financing strategies. They can monetize any situation because big problems equal big opportunities.

Clayton Morris Podcast

I'm not sure what the genesis was, but I think my interest in real estate investing began when I starting listening to the Investing in Real Estate podcast. I've long been a fan of Clayton Morris and Natali (Del Conte) Morris and have followed their careers as tech journalists. But for the last few years I've been focused on finding ways to generate passive income. Clayton and Natali are focused on buy and hold real estate investing, and I found it compelling.

I think what drew me in was Clayton's attitude that "we're in this together" – that Natali and Clayton are learning as they move forward in their investing journey. In addition, Clayton is believable because he tells the story of his own financial screwups, debt, and how he is winning despite his own setbacks.

The podcast itself provides valuable information. But, more importantly, it arms the listener with the courage to say "I can do this."

Beginning the Journey

I never thought about real estate. It simply was not on my radar. I thought the American dream was simply to own one home. Boy, was I wrong.

It started out with graduate school for me. Up to that point, I had not known debt. I was blessed in that my parents worked hard and paid for my undergraduate degree. However, with graduate school came credit cards and college debt. And then I met my wife, and she too had college debt.

Flash forward twenty years. We have three children. Our college debt is not paid off. We have credit debt. We didn't have any credit debt a few years ago, but with a new child, there were some home improvements we needed that we could just not afford.

There is good news. My wife's business has been growing over the 12+ years she's been in practice. I have advanced in my career and earn a good income. But we still live in our starter home. Our lifestyle has grown with our income.

We have been working for money rather than having our money work for us.

I want this cycle to end. I want to be able to retire someday, but the only way I see it as possible is by working now to generate passive income. Pay off debts, gain a revenue stream where money works for the family. The goal of this "news" section is to document our journey. Will you join us?