The Urly Bird

To keep your assets and not go broke after purchasing a Lamborghini and Mansion you need to have assets that generate enough cash to afford the purchases and your lifestyle.

Assuming that you are starting out brokering long distance real estate deals from your basement office using free Skype calls you need to imagine what your lifestyle will be once you close a multi-million dollar deal. Many of you have leads to 100 million dollar real estate deals that you are trying to close. Imagining your lifestyle when you’re rich allows you to budget how much cash your assets need to generate for you to buy a Lamborghini and Mansion.

How much will you earn from closing your real estate deal?

Assuming you close a $100 million dollar deal and earned a 3% commission you will have $3 million. That is probably not enough to satisfy your appetite given your connections, deal flow, and the information sitting on your computer. You might be happy earning $20 million from a few more deals.

You could own a share of the real estate that you joint-venture (JV) by partnering with or bird-dogging for the buyer. This is how I closed my first deal and earned cash flow from the property that closed.

What are your cash flow generating assets going to be?

Real estate of course.

If you purchase tangible real estate the price of the properties going up and down might not affect the cash flow that you generate. The rental market affects the cash flow that you earn. If you purchase a REIT fund your cash flow could be affected by its variance because the approximate 4% yield (which is your cash flow) is tied to how much of the fund you own.

Let’s say you have $20 million and invest that in real estate that cash flows $800,000 a year using a 4% yield.

How much is your rich lifestyle going to cost?

It depends on the location that you want to settle and how much you travel to close more deals. A private midsize jet costs about $20,000 per flight in the U.S. Let’s budget for 10 flights during the year ($200,000 per year).

You could move out of your basement to office space that you own in the most glamorous parts of L.A., Texas, Ohio, New York, Florida, or potentially Missouri. These are the hot markets; You might want to settle there so that you can close more deals and be close to the action. Let’s budget for $100 per square foot per year for 5,000 square headquarters in California and mansion ($500,000 per year). Everyone is going to want to work with you.

What will your expenses be?

A Lamborghini Gallardo or Spyder that is a good investment because it has good parts can be rented out is about $100,000. Let’s not figure out the cash flow on it and assume that it is a one time expense even though it can be rented and requires maintenance.

Here are your total first year cash flow after closing $20 million in deals:

• Real estate income: $800,000
• Private midsize jets (10 flights): $200,000
• California real estate headquarters and mansion: $500,000
• Lamborghini $100,000

After you close your first $20,000,000 in real estate deals you will be able to invest in enough real estate to produce $800,000 a year in cash flow that you can invest in building your real estate empire further.

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There are 4 things that I really like about real estate as an investment: the social aspect of networking, automated marketing systems, that real estate is a tangible asset and that real estate provides long term predictable financial returns.

Networking

You get to socialize while you build your network. Mind you, half of your network are crooks, a quarter of your network are regular people, and a quarter are the most elite people in society. You get to network using digital technology, in your office, or from the comfort of your home. You can also go to real estate investors meetups, which take place in almost every big city.

You can connect people all over the world to close a transaction. Part of making money in real estate is having a big network of cash buyers and motivated sellers who you can do deals with.

If you are just starting out in real estate as a career I understand how much pressure you could be experiencing deciding how to get involved with such a large financial commitment. You might be thinking about real estate as an investment and not the market that helps you buy and sell and that determines the value of your investment property. The network is the most important part of your real estate career. If you don’t believe me negotiate a multi-million dollar real estate deal and test whether the person whom you are negotiating with is trying to get access to your buyer or seller.

Most people that I deal with are in the middle of the deal. I deal with real estate professionals that are connecting their buyers and sellers for money. Most real estate investing strategies, along with brokering, follow the same pattern of matching buyers and sellers. 

Consider fix and flipping a property. Fix and flipping is when you purchase a property at a discount, make improvements, and sell it for a profit. When you fix and flip, you buy from a seller and sell to a buyer. You need to match the buyer and seller so that the property is not on the market too long. Your holding costs go up when your property is on the market. You need to bring buyers and sellers together.

You might be worried about investing in real estate because you are using your own money and plan on using a real estate professional. Most real estate professionals want to deal directly with the buyer or seller. If you want to become a real estate professional then you better deal directly with your own buyers and sellers.

One of the biggest things to watch out for when investing in real estate is getting cut out of the deal. You need to have your buyers and sellers under contract before introducing them to any other real estate professionals or buyers and sellers. If you do not have a contract with your buyer or seller their contact information will be used to build a relationship with them by other real estate professionals and cut you out of the deal without you being aware.

I’ve interviewed real estate professionals about their biggest problems for the past three years. There is nothing worse than spending two years trying to close a multi-million dollar deal to find out that the buyer is fraudulent. It’s really expensive to put deposits on property that you are planning on wholesaling to a buyer and not being able to find a buyer. I came up with a solution to your biggest problems when investing in real estate. The solution is this real estate marketplace which weeds through bad people and leaves you with serious cash buyers and motivated sellers.

A lot of gurus say that to get rich in real estate you have to invest in your education (and then sell you a $5,000 course). I believe that you need to invest in your network. Real estate professionals believe their network is their net worth and it is.

Even though so many headaches come up when dealing with your network there is a social component to real estate that I love.

You Can Automate Your Marketing Systems

You need to worry about sourcing good enough deals that cash flow. 

Have marketing systems allow you to run your real estate business in a more automated, efficient, and repeatable way so that you make more money with less headache in the long run.

It takes a lot of work to setup an automated marketing system for real estate. Having a lot of money to invest in marketing your property is as important as the cash used to buy the property.

You need to come up with your own marketing systems, which I have written extensively about to help you set up for own real estate investing business:

• You Don’t Need To Be An Agent To Find Good Deals
• How To Build A Buyers List
• How To Get Motivated Sellers Information
• You Won’t Close Out Of State Real Estate Deals Using Social Media
• 8 Benefits of Direct Mail For Real Estate

Real Estate As An Investment Is A Tangible Asset

When you are picking real estate deals to start your career choose local. Some cities are hotbeds for investing activity. Prices are being bid up and I see buyers and sellers there all of the time. Start local and build your reputation so that people outside of your city want to deal with you because they see how expert you have become in the area. They want to see that you can provide them the deals. You can make a cut for bringing buyers together with motivated sellers.

Become expert in your area before branching out. Let your network guide where you are doing investments.

Real Estate As An Investment Provides Predictable Long Term Returns

Even though long term historical real estate prices increase at a steady rate there are a bubbles are a concern in some cities.

When you start your career with out of state investing you can end up with deals with a low cap rate because prices have been bid up. Low cap rate means that your property generates a small amount of cash compared to what you paid for it. Property with low cap rate are not good buy and hold investments.

Something that can happen to you when you buy out of state is that you get drawn to properties which prices are discounted a lot. Price discounts are great but they might be in a bad neighbourhood.

If you aren’t ready to plunge into real estate investing consider investing in a REIT ETF fund. Returns are great compared to the risk you take and the cash flow is awesome. Investing in a fund is still investing in real estate but it lowers your overall risk by diversifying your investment and let’s you invest a smaller amount of money.

I can understand how much pressure you must feel needing to start a successful real estate business because the financial burden that comes with owning a house can threaten your life. Now you are going to be taking the risk with many properties all over the place. 

The four things that I like about real estate as an investment are the social aspect of networking, building and watching automated real estate marketing systems, that real estate is a tangible asset that you can visit and touch, and that historically real estate has provided reliable returns.

What are your favourite things about real estate as an investment?

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Real estate professionals should be careful about investing in distressed property when the property are in neighbourhoods with lots of crime and poverty because the property can be too risky, even though distressed property values are lower.

Generally, you’d think that distressed property is where the best deals are. If you aren’t careful you can end up with a property in poor condition and that can’t be repaired profitably. 

The attraction to pursuing distressed property is that they are cheap. Highly motivated sellers that are behind on their mortgage payments live in distressed property. Motivated sellers close quicker and price their property for less.

You might be on a beer budget and have champagne ROI taste. This appetite for high returns is risky. Your investment in distressed property might blow up in your face; You could be left with no cash and a property that is full of write downs. Write downs are losses. Write downs are when the value of the property is less than what you purchased it.

Losses can happen because you can’t find good tenants. When you purchase property in impoverished, high crime, low educated neighbourhoods with high vacancy you are left with poor tenants.

Unless you are flipping distressed property you rely on cash flow. Watch out and pick distressed property in a good neighbourhood. Good neighbourhoods have lower vacancy rates and people that can hold a job because they are educated. Try Neighborhood Scout to research profitable neighbourhoods.

Property in a lot of areas in the United States have high cap rates. Balance high cash flow properties for negative characteristics that can come with the neighbourhood.

Not all distressed home owners want to sell their property. Many want to stay in their home. Help them refinance their mortgage by building relationships with lenders. You can earn a finder’s fee.

Some distressed property are not worth your time

You can get distressed property that are in such poor condition that they are unable to be redeveloped profitably. Since you could be buying distressed property sight unseen and and that are out of state, you might buy a building that doesn’t produce cash flow.

Sometimes it is considered predatory to only do deals with highly motivated sellers that are experiencing financial distress. Many articles advocate using principled negotiation, which is finding win-wins. Other online articles recommend highlighting the pain the seller is experiencing, making it tough on the seller, and using a more aggressive close. The second type of negotiation is closer to predatory than the first because there is no empathy for the seller. There should be a focus on solving a real problem for the seller. Once you know what problem you are solving for a distressed seller the deal will be easier to close. 

You might consider yourself a problem solver providing a solution to someone in a tough situation. 

Access The Flock has motivated sellers that you can access.

The transaction cost might not be worth the investment unless you purchase in bulk. Lower net present value of purchasing one unit compared to the work to close the deal (sourcing a principal seller and the risk of dealing remotely) might require you to purchase more properties to make your business profitable.

The more you deal in bulk the more you run into fraudulent sellers. Don’t accept spreadsheets listing properties as verification that the seller is real. Try to get proof of ownership so that you know that you are dealing with the principal seller. You might have to sign a NCND (Non-Circumvention Non-Disclosure). Even after signing this document fraudsters can still steal your buyer and cut you out of the deal. Rely on the real estate marketplace’s Urly Bird Grade, which is a consensus as to how trustworthy the seller is who you are dealing with.

The main risks you experience when buying distressed property are whether it is in a good neighborhood that can still be profitable given it’s crime rate, income and education. The condition of the property is also a concern because it might not be well kept.

What are your experiences purchasing distressed property?

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Don’t have one lense when viewing cash buyers because they can be both crooked and legal. When dealing with a fraud you are left in a world where you do not know what is real. When you deal with trustworthy cash buyers you earn profits and have good feelings.

These are some of the ways cash buyers are both crooked and legal.

Your Cash Buyer Might Be a Middleman

Sometimes buyers are really middlemen that build relationships with buyers. There is an article on BiggerPockets by Craig Covert that recommends to real estate investors that want to take on less risk to become millionaires should become wholesalers. He says: "The safe bet if you elect to be a Million Dollar Middleman is to be a wholesaler who usually works with cash buyers... The Middleman’s secret is to work backwards; marketing to find buyers first before finding good deals to sell to them.” Many Consultants also find end buyers and are middlemen. You are not dealing with an end buyer when the buyer is really a middlemen that finds money. You want to deal directly with principal buyers.

Your Cash Buyer Might Not Be Real

When most of the industry doesn’t have cash you spin your wheels a lot trying to put a deal together. It is key to build the right relationships with end buyers and vet them. You will not know if they are the end buyer until you have experience with them. Even bank statements supplied by buyers are forged. This is also how long Daisy Chains of middlemen saying that they know a buyer when really they know someone that thinks they know a buyer when they really don’t. The real estate industry is full of entrepreneurs that find it easy to get into the industry and try to put deals together and do not invest in their own marketing systems to vet buyers. That’s why I have the Flock where, after finding your own buyers, you can have them vetted by the marketplace without risking losing control of your buyers. Bring them to the marketplace.

Your Cash Buyer Might Be Laundering Money

Marc Cohodes, who used to run one of the largest Wall Street hedge funds thinks that money launderers are actually killing people and cannot explain where they get their money from after buying million dollar houses in Vancouver, according to this video on Global News with Amy Judd. Cohodes believes that the Vancouver market could go down 50%. He says that the Chinese government wants money to stay in China and that it is flowing out. He says it’s "not a supply and demand thing, it’s a follow the money, money laundering, thing.”  

I wouldn’t dismiss Cohodes comments as racism because he seems to believe he is advocating and voicing his concerns about a real problem. I know that there are a lot of fraudulent people that claim to be big buyers and this problem could be more widespread than I initially thought; There are a few big cities across North America that could be facing bubbles and it might be due to money laundering from foreign buyers. I asked Cohodes what makes him think that it is money he says he cannot explain it all in a few tweets. I am waiting to hear back whether we will do a longer interview.

Your Cash Buyers Pool Funds

I was at the Edmonton Real Estate Investors Association and they were educating investors on how to set up a fund that uses other peoples’ retirement savings fund to earn a higher return on investment than average investments like stocks and bonds. They mentioned that they aim for 10-12% return and I do not think that it’s worth doing this type of strategy because you can earn that return by investing in a REIT (Real Estate Investment Trust) fund with less risk because REITs are larger, have a more diversified portfolio, and more professional management.

Your buyer can be a REIT or hedge fund that pools money from everyday working people. These buyers can have billions of dollars. It’s hard to tell who is really a billion dollar hedge fund when you are talking to them because they are too good to be true when you speak to them. It’s good to act like they are the real deal when you meet them. Protect your sellers contact information.

Your Cash Buyers Have Day Jobs And Get Mortgages

Some of your cash buyers are ordinary people that work. They aren’t entrepreneurs in the sense that they get in the middle of trying to put deals together. They are mostly investors. They have the cash. They might not have billions of dollars but they can help average real estate professionals close real deals. Their story is more believable so there is less chance of fraud.

Lots of cash buyers build relationships with lenders all of the time because they use funds from mortgages to buy investment property. I don’t know how realistic it is for your cash buyer to already have taken out a mortgage and be ready to buy because mortgage brokers and real estate brokers generally work with these types of buyers to prepare them to make a purchase. I have seen in my database cash buyers get their funds from mortgages nonetheless - even high interest rate mortgages - and are ready to buy.

Some buyers use vendor financing. Vendor financing require that the buyer have direct access to the seller so that they can negotiate with the seller to provide a mortgage for them. You can also try to negotiate the deal for the buyer and seller.

These are some of the ways that cash buyers are both real and fake.

What have you done to determine whether your cash buyers are real?

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I think it’s good to get your license if you are a consultant because you will be putting together out of state transactions and you do not want to deal with complaints, even though some jurisdictions are flexible about whether you need a license to be a consultant.

Most professionals hold licensed real estate professionals to a higher standard, even though some wholesalers avoid licensed real estate professionals when putting deals together. More people might deal with you if you show your license number in your emails because people do not want to deal with scammers. I spent years finding out what gets in the way of putting together large real estate transactions and most of the problems are eliminated if you go through the training that licensed real estate professionals go through. Licensed real estate professionals know their clients and do not bring them to the marketplace or enter a negotiation to promote their client until they have validated the client’s identity. Verifying and vetting buyers and sellers is a privilege in the industry. 

Licensed real estate professionals still run into Daisy Chains & Tire Kickers when they don’t use the Flock. Licensed real estate professionals have troubles marketing their clients so they gladly accept another professional bringing them a buyer or seller. The problem is, that other professional will also gladly accept another professional bring them a buyer or seller so you get a long Daisy Chain. Licensed real estate professionals are not immune to Daisy Chains unless they access the flock.

How have you found getting your real estate license has helped you?

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Access The Flock has the highest quality real estate leads according to it’s algorithms that filter and weed through Daisy Chains and Tire Kickers for you. The result are you making money by accessing cash buyers and motivated sellers.

I never knew that this would be the result of three years of working with you to get feedback, tweak, and testing headlines, form fields and the Birds of a Feather matching algorithm that weed through Daisy Chains and Tire Kickers.

There are bad people out there. There are bad people in my database. I don’t know who the bad people are, even after talking to them. I’m not like some real estate coaches that are wholesalers that can tell who’s fake within the first five minutes. I doubt that most of you are like him. Most people need community consensus about a person so that they get downgraded and filtered out of your list of leads that you can use to close mammoth and smaller sized deals all over the world, but mostly in the United States for now.

There are a also a lot of high quality people in the database. These are the Flock that you want to access. These are the bankers that control the flood of real estate that comes onto the market across the U.S., the hedge fund and billion dollar buyers. These are also the high quality local professionals that have their own powerful lead generation systems who just need a match.

Access The Flock - It’s Changing The World

Access The Flock is connecting smaller, local real estate professionals with some of the harder to access people in the world.

By accessing the flock and rating your match, you are changing the way the real estate industry does business.

What would you like to see from Access The Flock Real Estate Marketplace?

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Cash Buyers

• This California Apartment Building buyer has $4,000,000.
• This Caltrain, San Francisco, California buyer has $500,000 to purchase SFRs.
• This buyer has $1,000 to spend in Detroit on SFR and MFRs.

Motivated Sellers

• $1,000,000 minimum order to purchase SFRs across the United States

You might not be able to close your wholesale deal if you are using the double close.

What is the double close?

The double close is when you close with the buyer in one meeting and then close with the seller in the next. This blog post mentions that you use the funds from the buyer to close with the seller.

You might not be able to close your wholesale deal if you use the double close because some lawyers will not understand that it is a legitimate wholesale strategy and believe that there is fraud taking place. You might not be committing fraud. I think you should sell the contract, not the real estate.

The lawyer might be right about it not being a legitimate strategy in some jurisdictions because wholesaling seems to be a massive grey area across the United States. There is good reason for lawyers to be so concerned with fraud. I just saw on Bloomberg a scandal featuring fraudulent luxury home buyers where the transactions went through in Florida.

When I was a mortgage broker I was told that the closing lawyer might interfere with the closing of my deal. This could happen to you.

Why not use an Assignment Fee?

Assignment Fees are a second type of closing for wholesale deals. I haven’t heard any complaints about wholesalers using this strategy. With the Assignment Fee, you collect a deposit upfront and then collect the remainder of the Assignment Fee when the buyer closes with the seller. Use the diagram in this post to help you clarify the process.

What have been your successes or failures with the double close?

It’s absurd to be afraid of banks because they are your partners. Relationships in real estate are key. With social media, you can connect with banks and interact with them on a daily basis.

You should not have an us versus the bank mentality.

Investors love to talk about how they are “robbing the banks”. If you believe that you are “robbing the bank” because the return you earn on your investments is higher than the interest rate on your mortgage you are mistaken. Banks provide the mortgages to your investments. If you don’t pay you will be foreclosed. 

You are the bank’s customer. Banks need some mortgages to be paid because that is how banks make most of their money.  Banks are lenders. Show banks that you can pay them back.

You are in business with banks. One of the best ways to source real estate deals is with banks. Bank deals are called REO. Mention to Asset Managers that you can help them out with REO. Find buyers for banks. Sometimes banks deal directly with their own buyers, hire REO real estate agents, and use listing websites. Build relationships with banks, close big deals, and bring your deals to the Flock if you run into Daisy Chains and Tire Kickers.

How have you built relationships with banks?

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Ease

There are lots of reasons that direct mail is easy for you to do:

• Automated mailing systems in some jurisdictions make direct mail fast.
• Direct mail is cheaper than flying around the world to do deals.
• You can load your CRM and spreadsheets onto your envelopes.
• You can hire almost anyone to take over mailouts.
• It’s not a far trip to drop off your envelopes usually if you are mailing locally. Sometimes you don’t have to go anywhere at all to do a mail drop because it’s done over the internet.
• Picking graphics for your mailouts is easy if you are using an automated online system and have a logo.
• You don’t need to face much rejection compared to cold calling.

Branding

You can build a brand by doing repeat mailouts in the same location and by keeping your design consistent. Direct mail builds your brand because some recipients keep your mailouts in their house or office and come to know you because they see it often. To improve branding, have enough cash ready to send multiple campaigns.

Promotional Products

Promotional products are memorable and help differentiate. Create a promotional products based off your logo, such as keychains. Also, try to choose useful products that recipients will keep in their house, like pens, calendars, magnets, and informational products. One of the most useful informational products for homeowners is the price of their home compared to their neighbours.

Target A Market Based On Location

It’s great to send to the same location repetitively because it makes you the expert. You are more likely to close deals when you have a lot of buyers and sellers in one location. Real estate professionals, buyers, and sellers outside of your market contact you when they see that you are the leader in facilitating deals in that location.

Direct Access To Sellers

Direct mail is the best option for targeting sellers in a location because recipients own the residence you are sending to a lot of the time. This is great because you can put the seller under contract before anyone else. When closing deals it’s best to have sellers under contract before introducing them to anyone else so that you don’t get cut out of the deal. Being direct to the seller cuts down time spent negotiating with other intermediaries that help you gain access to the seller.

Direct mail is like hopping aboard the direct train that has no stops to its destination!

Drive Traffic To Your Landing Pages

To capture leads, include the URL of your landing page in your direct mail. Many real estate professionals keep one landing page for buyer and seller leads. I like keeping one landing page with a form field of whether the visitor is a buyer or seller for direct mail because a recipient might be a buyer or a seller. For pay per click (PPC) landing pages, it might be better to have two separate landing pages for buyers and sellers.

Trackable

You can track the results of each campaign by including a code on your direct mail for the recipient to enter into your landing page. You can customize your landing page to collect any information that is helpful such as, address, phone number, email address, whether the recipient is selling or buying etc. Setup analytics to track when, how many, and where visitors are coming to your landing page from. You can also change the headlines of your mailouts to see which one is most effective in creative leads.

What successes have you had from sending direct mail?

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