Today’s REI Classroom Lesson
In the classroom today, Franklin Cruz divulges lessons he’s learned and lets us know what worked for him in a particular deal.
REI Classroom Summary
Franklin Cruz analyzes different options you have once you acquire a property, including wholesaling, rehabs, and lease options.
Listen to this REI Classroom Lesson
Real Estate Investing Classroom Show Transcripts:
Mike: Welcome back to the FlipNerd.com REI Classroom, where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.
Franklin: Hey guys, its Franklin Cruz. I know, the tie, it’s amazing, I know, stop it, please. Anyway, if you’ve already seen my bio, I have a military background. I spent seven and a half years in the military. And I started part-time real estate investing and now I’m a full-time real estate investor for the last 15 years. I know, I look extremely young for being 65-years old. It’s fine.
Anyway we’re going to be talking about three hand-blistering things that I learned to crush it or three hand-blistering things to do right now in real estate investing to make a profit, right now.
Mike: This REI Classroom real estate lesson is sponsored by VirtualStaffNow.com.
Franklin: So let’s talk about these hand-blistering things and why I say hand-blistering things is because I do a lot of CrossFit and I do have a lot of blisters all over my hands. But it’s fine because I feel a lot manly even though I have a cook and a maid and somebody who does the landscaping. Anyway, let’s talk into this. Three hand-blistering things. Hand-blistering. Hopefully I’m spelling hand blistering right, but its fine. Somebody will auto-correct this.
Anyway, I’m going to share with you a story. There are a lot of things that you can do right in real estate to make money. There is rehabbing. There is whole-selling. There is property management. There is creating notes, creating mortgages, all this cool stuff. But what I want to share with you is a true story and this story is on Kayuga. So Kayuga is a property that we purchased and why I say hand-blistering is because this video is actually about something that’s really not hand-blistering. You’re not going to get out there and actually do the work.
One thing I learned when I first started in real-estate investing was I learned that you’ve got to earn your money. When you grow up, you’re dad is always telling you, or your mom, I’m adopted, so I didn’t have a mom. So my dad used to tell me, “Look son, you’ve got to go out there and you’ve got to work. You’ve got to earn that money. If you like it, you go buy it.”
I was like, all right, cool. I’ve got to do the rehabs myself. I’ve got to get a hammer. I’ve got to keep hammering it and one day I’ll earn money and make it.
And so then I actually got smart. What happened is, there was a shift in my brain that said, man these guys are sitting at their desks, whole-selling properties or creating notes and mortgages and this other stuff are actually making more money than me and they don’t have any blisters on their hands. No blisters at all on their hands. I was like what the heck? That’s not going to work.
So what I decided to do on this Kayuga deal, I’ll tell you about it. So this is a probate property that we got under probate and I bought the actual deed to the property. I purchased it for a lot of money and I only have a very short period of time so I’m only going to go over the outlines.
I purchased it for $2,500. I know it’s a lot of money, but I did it. And also at the same time too, it had $14,000 worth of tax debt. Now, so theoretically, let’s add up the numbers. I believe its $17,000 total that I paid for the property. But the property is a four-bedroom, one bath property.
So now where does the hand-blistering come into play? Let me tell you how I actually thought about making money on this. One, is I thought I could wholesale it out and sell it for say 25 and I could easily make a $7000 profit and walk away, right? Or I can always rehab it and sell it finished and the comps are running at 76. I can make a bigger profit. Or I could do this, I could do a lease option on the property.
So this is what I did. In a very short period of time, I’ll explain to you exactly what I did that actually worked extremely well. So what I decided to do was put out an ad for a lease option, AKA, owner financing. So what I did is put out the ad for owner financing which you can do at home. It’s very simple. All you have to do is be able to type. If you can’t type, you could use your nose.
So what you can do is I typed “owner financing deal.” So I had a flood of calls. They called in and said, “How much money do I charge? How much money is the down payment?” All these other things. So I said, “It’s not a down payment. It’s an approval process.”
So let me ask you, and you want to write this down. This is a good tid-bit. What is the maximum that you can put down as a down payment, the maximum that you can put down? Don’t ask, you never want to say to somebody, “What’s the maximum you can afford?” Because right off the bat, psychologically in their mind they’re automatically taking it back to the lowest amount in their head. So that’s why you want to say, what is the maximum? When you say what’s the maximum, they’re automatically thinking about, how much, what is the absolute max that I could put down?
So she told me, “I’ll put $8000 dollars down.” And what’s the maximum monthly payment on the property that you can do? She said I think it was $900 or $800 dollars a month. I said, “Okay, fine. Let me look at all these other schematics.” If you don’t take anything at all, take those two things. Always think about the maximum with somebody when you’re talking to them. And the opposite when you’re trying to negotiate with the seller, what is the absolute lowest?
So we asked that and what happened was, the conclusion of the story to wrap it up was she agreed to certain terms. So what I did is, we did an 8-year term, with 8K down, $775 a month, 8% interest, interest only. So theoretically at the end of the note, she is going to be paying me with compound interest and everything else, $54,000 over an 8 year period, and we got an 8-year period, 8K down and she’s paying me $775 a month. Remember, I don’t have a mortgage on this property any more because I only paid $17000 for it. Plus I didn’t have to fix up the property.
Now, if you guys want any other information, click around here. You’ll find some other amazing classrooms. If you want to find me on social media or if you want to find my where else you could get some good training from, you can find me online. Again my name is Franklin Cruz. All you have to do is Google it. It’s pretty simple. Thank you guys so much. Hopefully, you got something out of this great class.
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