The multi-list system is the reservoir of all the data that everybody else feeds off of(including Zillow, Trulia, and Realtor.com).So do yourself a favor and start with the source. Team up with a good investor-realtor and get set up on the multi-list the right way. Quit beating your head up against the wall, looking at all those other secondary systems.Because guess what? Their data gets stale. They’re good at picking data up when it first goes live, but they’re very bad at cleaning up once it goes under contract or is sold.Don’t waste your time looking at properties that aren’t even available anymore.
So, you’ll get an email with a link to the system. There’s usually a dropdown box, and you’ll get to look at the full listings. This is all the data a real estate agent can give you legally. It’s all the data that the realtors have, so it makes you very competitive.You will typically get a couple hundred listings, the first time out.
Next I want you to start separating the good from the bad. Your job is to get down to at least no more than 30 properties, all from your desktop. You won’t get out in the car until the very end, and you’ll understand why in a just a minute.
When you’re first sifting through properties on your computer, you want to start separating the wheat from the chaff. You must start creating a good pile and a bad pile, and first you should look at the list price relative to market value.List price, in and of itself, means nothing to me. It’s meaningless. But relative to other data, it does become relevant.
If the seller’s got his place unrealistically listed—in other words, it’s listed higher than that market will bear, particularly if a foreclosure or an old house in an estate—why should I waste time on that property to try to get this guy to come down?
I’ll show you why that becomes more important, a little bit later on in this process.
The approach that other people teach you iswhat I call the “shotgun approach,” which is, make all the offers you can make, and some will be bound to stick. What a horrible use of your time!
What I’m teaching here is the high percentage shot. I want you to only make offers on properties that have the greatest probability of being a successful investment for you. It all starts with the numbers. You look at the numbers first before you go look at the physical property.
I promise if you use this process, you won’t be working your tail off. You’ll only be doing this a few hours a week.As a matter of fact, your realtors will want to work with you more because they’ll recognize you know what you’re doing.
In any case, this is the first of several passes here.It takes maybe three passes to narrow this down, but the second time around I’ll start looking more at the pictures of the property.I’ll look at square footage: the size of the property, the size of the yard, the size of the rooms, how many bathrooms, how many bedrooms. If it’s a three-bedroom home, does it have a separate dining room? Is there a garage? Is it a one-car garage or integral garage, a two-car garage?
I’m looking at all these pieces of information, relative to the market that I want to invest in because what I want is a multi-unit that’s going to be in high demand.I don’t want a really oddball property that, maybe everybody in the area has garages, but this property doesn’t. No, I don’t want that kind of property. If everybody has three or four bedrooms, I don’t want a two-bedroom.
As a matter of fact, I’ll tell you: Don’t buy two-bedroom homes. You can buy apartment buildings with two-bedroom apartments, but don’t buy a single-family home with only two units. You’re just going to hurt yourself; you’ll be able to rent it, but you’ll have a hard time selling it later on.
So now that you’ve got it narrowed down, you’ve economically filtered out the wheat from the chaff, next you’re going to be spending more time and energy on the properties you believe will make the most sense, economically.
Now we look at the financial data of the multi-units.Most good investors will provide you the numbers, in other words, what they’re currently getting for their rentals. Now this information I’m giving you here, this is based on averages nationwide, okay?For good investment grade properties, where cash flow is relatively high, relative to the cost basis of the property(in other words, your cap rate and your cash on cash returns are favorable), I’ll give you the rents and taxes you should be looking for.
So this is just a guideline, an average you should receive for a one-bedroom, two-bedroom and a three-bedroom, and I give you the taxes and what you should be looking for.
Relatively speaking, the insurance costs should be about half of a percent of the total cost, based on the property—in other words $500 a year for a $100,000 property.
The cost per unit you might spend is an average of $35,000 for a three-bedroom unit,and an average of $25,000 for a two-bedroom unit. Again, these are just guidelines.There are other variables here, you know, the turnkey properties, versus ones that need more rehab, more renovations, more improvements.But trust your instincts because I’m not going to let you make mistakes. The value is in the exercise. You need to go through the exercise.
Develop your instincts, develop your intuition, and you will get more experience doing this than most other people or other investors who will wonder how you’re able to do what you’re doing so successfully.
Now, you’ve narrowed your search down. Next you have to go drive by the properties.There’s no way you’re going to do a more thorough financial analysis and a physical analysis on 30 properties.You need to drive by, and cut your list in half. Cut it down, in fact, to a third, 10-15 properties at most.
At this point, you’re going to email your investor-realtor with the final list of multi-list numbers that you believe are the best, highest probability of being a profitable investment for you, along with your homework.
That’s what we teach them to do. They’re going to review your notes and review your homework, and tell you if they agree or disagree. Ultimately, it’s your decision. That’s not only the law, that’s common sense.But they’ll help you narrow down your search, again, to the final list of six or seven properties. Those are the properties you will actually go visit in person.
You’ll make your appointment with a realtor, and he’llset you up with all the property owners or the other investors to get you into those properties.
Essentially, after reviewing you will have four to seven properties that will cash flow and do not need a lot of work.Really, if you get to even one to three properties, this system would still be worth it.If every time you went out, you could find one to three propertiesthat would absolutely be worth it! That’s what this system does for you. It’s exactly what it did for me, and it’s what it does for several hundred other people that we taught this system to.
I’ll show you the maximum level offer and the cash flow a little later.
But at this point, I or your agentis going to review your work.You’ll decide which properties to make an offer, or multiple offers if you want, of one, two, or three properties, and we’ll fill out the sales agreementand get the hand money check.
You provide your proof of funds to me(which means you got prequalified), and we have that letter from the bank. At that point, your investor-agent will do a litmus test on the properties you selected.That litmus test is determining the After Repair Value, which is what the property is worth after you’ve made any modifications or perhaps raised rents in the area.
You’re looking for comps, essentially, to validate your decision making process. When we’ve validated that, we might narrow it down further to one or two properties, and then we go make the offers.
If you like this process and want to learn more about becoming an Investor Agent, I highly recommend you take the training course Investor Agent: Make More Money, Not More Work.
For right now, though, you need to start choosing specific properties that you’d like to invest in. It’s required to get an agent, so go ahead and definitely call. Call Beverly at 1-800-931-2605, so we can help you hand select the right agent for you to work with.
Don’t take this lightly. We put this in place here for a good reason. If you don’t work with a trained qualified investor-agent, you’re putting your investment success at risk. I promise you, nothing will hold you up more than not having the right realtor. I guarantee it.
So go ahead and call us, email us. We’ll get you set up, and before you move on, please do this.
In the next session, I’m going to show you how to do the financial analysis of a property. He, who masters this discipline of property analysis, will become the master of profit.
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