There's nothing better than seeing J. Massey in action as he fields questions from investors and students at all levels of learning. (There are four, you know!) It's like watching an all-star baseball player up to bat who hits nothing but homeruns. J. knocks the answers out of the park every time! He's not good at it… he's excellent! New investors learn a lot during these live Q & A sessions, but there are seasoned investors that show up week after week to get their questions answered, too. They get what they come for whenever they log in to watch the weekly Q & A with J. web show LIVE every Tuesday at 4 p.m., PST.
Since the show can only be accessed by Cashflow CORE Members, you may have missed it. We gave you a sneak peek on Monday; we're doing it again (and probably the last time) today in this special behind-the-curtain look at an expert investor in action. Is there anything J. can't answer about Real Estate Investing, what it takes to be an entrepreneur or everything you need to do to set up and run your business? Not so far! Become a CORE Member and see if you can stump him! Better yet… become a member so you can watch him rip deals apart, help you with your deals, answer all your questions about investing, and also get to know the other members. It's a great place to network with lots of likeminded individuals. You might just end up doing deals with other members! That's when the magic really happens. Learn more. LISTEN NOW
On this episode of Cash Flow Diary, J gives you another opportunity to listen to the live question and answer session. Get ready for a peek behind the curtain of the members only area in the “Q & A with J.”
[13:13] Q1: Josh’s scenario
[15:15] Q2: Wholesales across the border
[21:51] Q3: Josh’s scenario follow up
[26:57] Q4: Processes don’t change
[29:55] Q5: Asking for referrals
[30:55] Q6: Coin laundry vs. no laundry
[32:58] J’s episode insight (Investor identity)
[34:44] Q7: 50,000 ft2 warehouse
[40:05] Q8: Due diligence check list
[41:35] Q9: Setting up a team
[42:46] Q10: Building a team in an area you’ve never been to
[44:30] Q11: Compensating credit partners
[45:46] Q12: In house laundry service
[48:28] Q13: Property managers
[53:06] Q14: Pre-foreclosures & probate
[56:35] Q15: Non-profit commercial deal
Questions and Answers:
Q: Josh came across a 76-unit apartment complex, and wants to contact the seller but doesn’t know what to ask. The asking price is $1.2M, with a fully occupied monthly rental income of $34K. What do I need to do next in order to move at the speed of instruction?
A: Call the seller and do the following. Ask, “Is it for sale?” Find out the story. Go see it. An offer is an invitation for a conversation, nothing more.
Q: If we do wholesales across the border, should we initially have an LLC set up first? What taxes will we have to pay? How do we go about double closing deals if we don’t have cash to close?
A: You don’t have to set up an LLC. When you do deals across borders, you deal with two tax jurisdictions. When it comes to taxes, check out episode #25 and contact Tom Wheelwright. Having the cash on a double closing deal is irrelevant. Not having the money doesn’t prevent you from making the offer.
Q: The seller is wholesaling the property, it’s under contract, and the property needs $400k in renovations.
A: The seller is the person on the title so J doesn’t see how the seller would be wholesaling the property. You need to deal with the person on the title, and avoid ‘daisy chains.’ Be seller direct. Use a residential purchase agreement, and during the process use an assignment agreement.
Q: What is the process of doing multi-family units in a state you aren’t familiar with, when your buyer says they have an interest in it?
A: The process doesn’t change. The amount of interview time you invest with the potential buyer changes with regards to price. Make sure the buyer is on board, otherwise you’ll have a challenge.
Q: What’s a great way to ask for referrals, especially when you have missed out on the deal? I was not able to help him solve his problem, but I’d still like to ask him for referrals.
A: J answered this question with a sample conversation:
Susan: Unfortunately, we weren’t able to figure out a way to help you, but let me ask you a question; do you think we did our best?
Susan: Okay, really, why?
Susan: If you had a friend or family member that needed the same or similar service that we offer, do you have someone that you could refer them to?
Susan: Do you mind if you and I develop a relationship to where I’m that person?
Client: I don’t mind at all.
Susan: [Puts client in database and follows up.]
Q: Have you found a minimum of units at which it becomes cost effective to have coin laundry versus no laundry at all?
A: Consider the following:
- Floor plan/layout of how the property situated.
Do you have any common areas?
- What is the demographic in terms of the closest laundry room?
It could be worth taking your lowest producing types of units and turning that into a laundry.
- Adding internal laundry to the units, depending on the type of customer you are serving.
Q: My company has an empty warehouse they are trying to sell or lease. How can I start the conversation about helping them to find a buyer or occupant when I’m their employee? I also have a buyer who doesn’t fit this property because the space isn’t big enough, but he is very eager to by a 50,000 ft2 warehouse for his cheerleading gym. Where do I start finding commercial industrial sellers willing to work with a wholesaler?
A: Go to the next cheerleading competition in your area, the Cheerleaders Association of America (or official organization). The issue is: do they have a need for 50,000 ft2? This is a six-month to one-year escrow type of deal. Go to loopnet.com, enter your location, Industrial, and look for the Industrial estate agents for your tenant.
Q: Does anyone have a due diligence checklist to make sure all the cost items have been accounted for, including insurance, property manager, permits, and any other costs related to buying a property?
A: J will take his HUD statements and create a downloadable PDF version to make this work out.
Q: Would you set up ‘their’ team? Are you fixing the property, or is that the buyer’s responsibility?
A: As a wholesaler, you could set up the team for them as it makes it easier for your customer to buy. You can do as much or as little as you want. At bare minimum, you need to provide the house.
Q: I’ve been working with a relator on a property in Louisville, KY. How do you go about quickly building a team in an area you have never been to?
A: Go to Activerain.com, do a search, and see who you find in the way of real estate agents. Go to National Association of Residential Property Managers.org, and search for property managers (who will lead you to any person you need in order to effectively run the property).
Q: How do you think a credit partner should be compensated on the cash flow quadrant, and what benefits problems do you listen for?
A: A credit partner is a percentage of the amount of the loan. E.g.: If the amount is $2M, you want to pay a number of points for the use of their credit. Listen for the person who understands real estate and cash flow (has no more cash but has great credit), a great W2, and can PT something that makes sense for you. Start at a point where you are just paying a fee for the service, and go up from there.
Q: What is the minimum distance from the units you would say that it would make sense to have an in-house laundry service?
A: 2 miles.
Q: If one unit of the property is used by the property manager, can you write that as an expense to the business? Also, do you consider 12% for a property manager high?
A: What services are you getting for the 12%? Who else in the market place knows how to serve your customer? What customer are you serving, and experience are you creating? You can write this as an expense to the business, but it would be better to have the opportunity to produce bigger income.
Q: Who or where is the best contact to reach out for a list of pre-foreclosures, and also for a probate index?
A: Most are index based, and a lot varies from county-to-county, state-to-state, and country-to-country. The best way to start with probate information is look up probate and the name of the county. Look at propertyradar.com.
Q: I need help on a commercial deal with a non-profit owner for transitional housing for homeless veterans.
A: If this is California, this will probably be a non-starter. Sale-leasebacks in California are a challenge because they typically violate usury laws. It sounds like the person has a temporary need for cash.
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Links to Resources Mentioned
Podcast episode #25 (Tom Wheelwright)
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