Forced Appreciation for Noobs

You know those customers at Home Depot, who point their finger and call everything "Thing" or "Thingy" when seeking advice. 

They have no idea what any of the tools are called in English. They just show up and trust the Home Depot staff will understand their mumbling and point out a way to resolve the issue.

Well. That's me. And trust me - the approach works!

Ever since I started 50Doors, I mostly point my finger, gesture, mumble and draw the best I can whenever it comes to building, renovating, and fixing things and thingies.

And people around me not only understand me but also gladly help me out!

To my big relief, I realized that not knowing can be advantageous.

Through lack of knowledge and skills, I learned how to trust people who know better, how to tell experts from talkers, and how to create real value from simple ideas.

Here is an example.

I had an idea of renting a property, which was never rented out before, but I was unsure because cash flow wouldn't be good enough. I talked my idea over with a friend who is a lot more experienced. He suggested that I renovate, split the place into two units and double my cash flow. My gross annual rent will increase by $14,400 and result in positive cash flow.

I loved the suggestions, but I was unsure that I could split the unit into two apartments. I talked it over with my husband who is a lot handier. My husband thought the concept was feasible and explained to me how the unit could be split. Together we made these drawings:

I loved our discussion and the drawings, but I wasn't sure how this could actually be accomplished and what it would take.

So I sent our drawings to my friend, who runs an on-demand property management company. Within a week, I had several quotes and a start-to-finish renovation project plan. I now knew that a $25,000 investment will be required. The work could be finished within about three weeks.

Wow! That's a 57.5% return on investment!

ROI is $14,400 / $25,000 = 57.5%

It's been almost three weeks since the start. The work is nearly complete. Two separate units are now a reality.

I am starting to look for tenants! It seems surreal that the ideas came to life so fast and soon there will be two families moving into their new homes and starting to build their memories.

Simple ideas turned into real value, which will positively affect the lives of many people for many years to come.

I am extremely grateful to the amazing property management company that actually got the job done!

Fortune Property Management 

converted my mumbling into 

two beautiful apartments 

within a couple of weeks.

Thank you!

Pocket Deal: You make money when you buy! Literally

Got a property with 20% off!

In one of the real estate training programs I took, we learned about pocket deals.

I knew, in theory, that if you build great relationships with real estate brokers, you'd start getting deals off the market, which they call pocket deals. But so far this has never happened to me until today.

Today is my lucky day!

Because... I GOT MY FIRST EVER POCKET DEAL!


These deals are supposed to be great because:

• Price is low - you get a gigantic discount
• No one else even knows about the deal
• No competing offers even in the hot seller market!

Here is how it happened.

One of my friends focuses of flips. It's essential for him to find properties at super low prices. So, he  designed a system of finding deals off the market and putting them under contract. His system works great!

He gets houses ch-e-e-e-e-e-a-a-a-a-a-p. Then, fixes them. And flips!

Occasionally, he comes across a house at a good discount, but the discount isn't big enough for a flip. The cost of the transaction would eat most of the profit. These situations are best for those who buy-fix-rent-&-hold, like myself.

So instead of flipping, the deal was assigned to me. In this transaction, my friend plays the part of a wholesaler. He adds a profit (aka assignment fee) for himself before re-selling the deal to me.

Here are the numbers:

Market Price	290,000	[1]
Sold to Whosaler At	217,500	[2]
Assignment Fee	15,000	[3]
My Price	232,500	[4]
Downpayment	54,375
Closing Costs	10,875
Renovation	15,000
Total Investment	80,250	[5]
Instant Gain	31,625	[6]
ROI at Purchase	39%	[7]

1) Comparable houses are currently selling for 290K

2) My friend was able to purchase the property off the market at 217.5K

3) He charged finders fee,  which is called assignment fee, of 15K when he assigned the deal to me

4) I am paying 232.5K for the house

5) To get the property, my total investment will be ~ 80K, including dowanpayment, closing costs, and a renovation

6) Based on current market prices, I'll have immediate gain of 31.6K:

Gain = 290K - 232.5K - 10.8K - 15K = 31.6K

7) The moment I buy the property, my return on investment (ROI) is almost 40%:

ROI = 31.6K / 80.25K = 39%.

How to Set Up a Join Venture and Raise Other People's Money

The meet up I attended yesterday was really great. Russell Westcott, Former Vice President of REIN, JV & Raising Capital Guru, gave two brilliant presentations. In the first one, he covered key foundational elements of real estate investing. The second topic was Joint Ventures (JV) and raising people's money.

I'd like to summarize JV presentation. I am sure that at a certain point, I'll hit a financial wall and will have to figure out how to get a down payment and financing using someone else's money. In addition, it will be amazing to grow personally and also together with others as a team.

What's Joint Venture 

I loved Russell's definition of a JV. He showed a comic (which unfortunately I can't find to add here) with three kids on a play ground: a girl, with a jug of peanut butter; a boy, with a can of jelly; and another boy with a loaf of bread. The little girl elbows her buddy with the jelly and suggests: "Let's JV that guy for his bread".

Principals of Success (4 G's)

To get started with joint ventures, most important is to have the right mindset. Russell covered 4 G's to recap what he believes is crucial.

Growth Mindset

It's important to recognize that no matter how afraid you might be to get started, the skill of raising money is a just skill and you can master it. Everyone with a growth mindset can change and grow through learning, action and consistent practice.

Grit: Learn and keep going 

Another hurdle many get stumbled upon is getting "no"s. Russell is sure that the person who gets the most no's wins. I agree with him! It's important to remember his tip on learning from every no: just ask what would have to be different in the deal, for the answer to become a yes. Then, adjust course or pitch, and try again. Focus on finding solutions and chop on a problem bit by bit, things will come together.

Giving

Many people are afraid to ask for money and feel awkward just thinking about it. The reality is that you are not asking for money. You are a leader and do-er who opens up opportunities for others, which they'd probably miss out on without you.

For example, I know some of my friends, often tell me: "hey, I don't know how you even do this?" and share that they worry a lot about future, job security, etc., yet can't figure out how to start shifting and taking control of the situation. If the right opportunity presents itself, it will be so great to be able to help them out - get a property together and show that investing is doable.

Find what the person needs, his/her why's, dreams and obstacles. Show them how to get there!

Gratitude

Russell reminded that practicing active gratitude will be helpful along the way. Be grateful for your  partners, team-mates, family and friends and make sure they know.  Gratitude will return to you from everyone around ten-fold. In his book "The Happiness Advantage", Shawn Achor explains that gratitude plays an enormous part in our well-being. It makes people happier, more optimistic, better connected socially, forgiving and energetic. Be more grateful and you will get more done faster.

Negotiating a Joint Venture (4 M's)

Now, in order to actually get the deal done, you'll need to negotiate and align with your partners on 4 aspects and terms behind them:

1) Money - who will be giving the money to cover the down payment and acquisition costs

2) Mortgage - who will put their personal name as the guarantor and qualify for a mortgage

3) Management - who will manage the venture

4) Mastery - who has the right skills, knowledge and experience for the venture to be successful.

I loved the event and feel very inspired. Cheers to building more and better together!