2/4/2011. Tonight's Meeting.. Creative Buying Strategies for 2011: Making Money when you have No Money. w/ Reggie Lal. 1 st Time Visitors?

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1 Tonight's Meeting.. Creative Buying Strategies for 2011: Making Money when you have No Money w/ Reggie Lal 1 st Time Visitors? 1

2 Join us at 6:30 pm to Network Bring Your Real Estate Questions Dine with us after the Meeting! Join Us in the Cityside Café after the meeting Come Network & Bring Your Real Estate Questions *** Must Order Food by 9:45pm*** 2

3 CCWB Library Free To All Annual Members! Check out the list of educational Books, Tapes, CD s and Video s available for check-out Message Board Take Advantage of the Free PR Post Now! 3

4 Next Meeting.. Wed. March 2 nd Taxes & Real Estate w/ Lorraine Evans Disclosure: We are Real Estate Investors! examples only 4

5 This is your club- Invite a friend and help us grow ** Feel Free to us with ideas and suggestions*** Reg@CCWealthBuilders.com Haves & Wants 5

6 Making Sense of it all Feel Free to Bring Your Real Estate Questions 6

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12 Adham Sbeih 12

13 How to Make Money in Real Estate when you Have No Money (Yeah it s possible!) with Reggie Lal BeTheSmartInvestor.com Today s Valuable Insights Why Now is the Perfect Time! How to make Money w/o Any Money Real Life Deal Examples Exploding your IRA Creating Killer Cash Flow Q & A Buckle up - Here we go! 13

14 Why Now is the Perfect Time! 14

15 6 States accounted for 62% of US foreclosures CA FL NV AZ IL MI US Foreclosure Filings 1 Household in every 136 homes (all types) 15

16 It s Not Over Folks California s ½ Price Sale - On Now! Peak vs. Current Price (July 2010) Sacramento Aug % Riverside Area Aug % Los Angeles Aug % San Diego May % San Francisco May % Santa Clara April % 16

17 History Repeats Itself- Last Cycle. Condo- Stockton CA 2 Bedroom 1 Bath 840 sq ft Built

18 Last Cycle: 2001 Purchase Contract Last Down Cycle Purchase Price: $6,500 Rent = $595/month Cash on Cash Return 119% Value at the peak $140k 18

19 All these Opportunities How do you make money without any money? Probate Trustee Sales Short Sales REO Pre-Foreclosure Real Estate Investor High Equity Farm Others. Non-Owner Occupied Auctions HUD/VA 19

20 Creative Financing Strategies Subject-To Financing Wrap Around Mortgages Seller Financing Options Lease Options Joint Ventures Others??? 20

21 Show me da Money! Silent Money Partner Joint Venture Owner Financing Retirement Accounts (IRA s) Home Path (Fannie Mae) Have a Garage Sale Cash- Yours Conventional Loan Friends & Family Private Money Hard Money Credit Line VA Financing Sell Something! Note Private Money Forms Toolbox Deed of Trust Joint Venture Agreement Purchase Contract Assignment of Contract Addendums Others?? 21

22 So You Ready to Make Some Money??? Make Money w/o Money Example #1 Finding Money you already Have (IRA Roll Over) 22

23 My Personal Story Regular Working Guy! Improved PLAN : Self-Directed IRA! Roll Over Previous Retirement Plan to Self Directed IRA Net Monthly Rents Go Back into IRA Tax Fee! IRA Buys House as Long Term Rental House Rents for $900 per Month 23

24 Improved Plan in Action: IRA Long Term Investment- Sacramento, CA Half-Plex 2bed 2 Bath 904 sqft Built 1984 * Rent Ready Purchased By My Rolled Over IRA: $47,250 (+ Closings Costs) Purchased off the MLS- $47,250 24

25 My IRA Rollover Purchase Now has Monthly Cash Flows Monthly Rent $900 Taxes -$ 52 Insurance -$ 50 Property Mtg. -$ 85 Vac. & Main. (10%) -$ 90 Net Monthly Cash Flow $623 $49k Investment =15.2% ROI Which Would You Choose? Or 6.4 % 15.2 % 25

26 Want to Explode Your Returns. 6.4% vs. 15.2% (How about after 20 Years) Plus Future Appreciation! What Happens When CA Comes Back Roll Over Previous Retirement Plan to Self Directed IRA IRA Owns House as Long Term Rental 100% of the Sales Proceeds Back in IRA Tax Free! Sell House at the Top of the Market 26

27 Make Money w/o Money Example #2 Wheeling & Dealing. Have a Garage Sale Sold April 2008 $36,000 27

28 -11 Purchased a Condo Unit May 2008 $36,000 28

29 -11 Rent Condo for $800/mo 29

30 -11 Purchase $36,000 Market Rent $ HOA Fees $ Taxes $ 50 $ Cash Flow aprox. 16% ROI Use the $585 cash flow from the condo to finance a New Toy 7 Years have the Car Paid Off 2 Assets Free & Clear! 30

31 Make Money w/o Money Example #5 Have a little bit of Money? Hard Money Loan Duplex- each 2 bed 2 bath Downtown Sacramento, CA 31

32 Deal Flow Flipper put Property under contract -Purchase Price $250,000 -ARV = $430,000 -Approx. $50k Repairs Flipper Needed Funds to Purchase the Property - Called Hard Money Lender who put up 100% of the purchase price ($250k/$430k = 58% LTV) 1 st - Note & Deed of Trust Secure Hard Money Lender 32

33 100% Financed Purchase Flipper paid for the Rehab Only! Before After 33

34 Duplex, Sacramento CA ARV- $430,000 Profit Summary Sales Price (Cash Buyer) $415,000 - Repairs & Holding Costs - 54,350 - Resale Costs (7%) - 29,050 - Payoff to 1 st HM Loan -250,000 -Loan Costs to HM Lender + Points - 22,500 Est. Profit $59,100 Approx. Only 34

35 Make Money w/o Money Example #3 Flip using an Option! Bayview St., San Francisco, CA 3/3 2,173 sqft Built

36 Step #1 : Secured Option Secure 45 day Option to Purchase for $605,000 Option to Purchase Agreement 36

37 Memorandum of Purchase Option Recordable! 37

38 Step #2: Flip House Sold to End User Sold property for $655,000 Flip an Option Summary Exercise Option (buy) $605,000 Flip House (sell) $655,000 38

39 Option Payoff thru Escrow to Investor **Less $ 530 Misc. Fees 39

40 Make Money w/o Money Example #4 Wholesaling for Quick Cash 40

41 Offered $153,000 ARV $240,000 41

42 Deal Summary Contract Price = $153,000 $167,000 Wholesalers Profit $14,000 42

43 Make Money w/o Money Example #6 Wholesaling with a Twist 43

44 45 th St, San Diego CA 2bed / 1bath 950sqft Deal Flow Flipper put Property under contract as Cash Offer -Purchase Price $110,000 -ARV = $200,000 -Needed $30k Repairs Wanted to Wholesale to other investors for $10k (needed the money to eat and pay bills) Called Me as potential Wholesale buyer 44

45 Private Financing Proof of Funds Letter Private Financing Proof of Funds Letter 45

46 Deal Flow I had a retired investor that needed help placing some funds to generate monthly income Retired Investor financed 70% of the purchase I financed the rest + rehab as a Joint Venture Project I Advanced Wholesaler $10k at purchase (Advance on Joint Venture Profits) Converting an All Cash offer to Private Financing 46

47 Private Money Forms Toolbox Note Deed of Trust Joint Venture Agreement Purchase Contract Assignment of Contract Addendums Others?? 1 st - Note & Deed of Trust Secure Retired Investors 70% Purchase Loan 47

48 Joint Venture Agreement Between Myself & the Flipper who had the property under contract 2 nd Note (Equity Line) & Credit Line Deed of Trust Secure Myself for the balance of the purchase price + Rehab Funds I would be advancing 48

49 $0 Money out of Pocket for the Flipper who originally was considering Wholesaling 49

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51 45 th St, San Diego CA 2 Bedroom, 1 Bath, 1,100 Sqft ARV- $200,000 Profit Summary Sales Price $200,000 - Repairs & Holding Costs - 33,560 - Resale Costs - 16,555 Retire Investor Generated Income too! - Purchase Price -110,579 -Loan Costs to Lender - 6,600 Gross Profit $32,706 50/50 Rehabber & Private Lender (Me) = $16,353 each * Estimates Only Make Money w/o Money Example #7 Joint Venturing to Wealth 51

52 Brett St., Inglewood CA 2 Bedroom, 1 Bath, 1,100 Sqft ARV- $305,000 Deal Flow Local Flipper found a Deal through a Wholesaler Purchase Price $195k ARV = $305k Needs $30k repair Flipper used Private Money and did a 50/50 joint Venture with Private Lender Private Lender financed full purchase and rehab costs 52

53 Residential Purchase Agreement Joint Venture Agreement 53

54 Secure Private Lender: Recorded Deed Of Trust Straight Note W/ Equity Share Joint Venture Clause 54

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58 Brett St., Inglewood CA 2 Bedroom, 1 Bath, 1,100 Sqft ARV- $305,000 Profit Summary Sales Price $305,000 - Purchase Price -195,788 - Repairs & Holding Costs - 34,603 - Resale Costs - 22,893 Gross Profit $51,716 50/50 Rehabber & Private Lender = $25,858 each 58

59 Investing Strategies for Exploding your IRA! Plays for Your IRA Buy Real Estate Lend Money Joint Ventures Options Fix & Flip Long-Term Rentals Assignments Hard Money Rehab Loans Equity Share Discounted Notes Long-Term Loans 59

60 Make Money w/o Money Example #8 Creating Killer Cash Flow in an ROTH IRA Troubled Investor Owns 2 Run Down 4- Plexes Opportunity Eagerly Awaits my IRA! 60

61 City Code Violations How Can My IRA Help? IRA loans owner $6,238 to rehab 1 unit IRA collects 100% of Net Monthly Cash Flow until $6,238 Paid Back Unit Rents for $650 61

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63 1 Unit Cash Flows Monthly Rent $650 Property Management -$52 Vacancy & Maintenance (10%) -$65 Net Monthly Cash Flow $533 IRA Collect 100% until Principal Paid Off ($6,238) approx Interest After IRA Payoff- $533 is split 50/50 until Property is Sold ($266 each) Deal Summary IRA loans owner $6,238 to rehab 1 unit After IRA is Paid Back (12 Months) IRA collects 100% of Net Monthly Cash Flow until Paid Back ($6,238) Unit Rents for $650 Net Cash Flow Split 50/50 ($266) 63

64 What s in it For My IRA? After Orig. Principal ($6,238) was paid off. $267/mo. X 12mo. = $3,204 $3,204/ $6,238= 51% Return After 7 Years.. $22,428 What s in it for the owner? Improved His Property City Violations Cleared Now Has a Performing Asset No Repairs on His Part No Money Out of His Pocket No Management Headaches (PM) Gets 50% of the Cash Flow Forever Keeps 100% of the Upside $ to Start Work on the Next Unit True Win Win!! 64

65 Private Money Forms Toolbox Note Deed of Trust Joint Venture Agreement Purchase Contract Assignment of Contract Addendums Others?? 65

66 Cost: $169 $129 if Registered by March 25th Visit: BeTheSmartInvestor.com Workshop Schedule Critical Elements of Evaluating a Deal Personal Investment Strategy Understanding Real Estate Contracts and when to use them. Title & Escrow Process Investing Tax Free Deal Examples and Much More. 66

67 Q & A Feel Free to Contact Me with Any Investment or Real Estate Questions Reggie Lal Reg@BeTheSmartInvestor.com Please Visit my Blog: ReggieLal.com 67