steve cavanaugh investor, entrepreneur, mentor/coach, musician investing in real estate since 2004...

Real Estate Investing Success Brainwash

Steve Cavanaugh

• Investor, Entrepreneur, Mentor/Coach, Musician• Investing in Real Estate since 2004

• Wholesaling• Rehabbing• Rentals• HML• Mentoring/Coaching/Consulting

• Southern Maryland Real Estate Investors’ Group www.SOMDREIG.com

• www.AskTheFlipVIPs.com

http://www.somdreig.com/


How I Got Started

• Worked IT job – one hour commute EACH way• Nine hour days• Hated work!• Read The Cashflow Quadrant• Read www.flippinghomes.com; Attended

Steve Cook’s boot camps


How I Got Started

• Took inventory of my resources• Decided on a plan of action• Used resources to get into first real estate

investment• Closed and Quit on same day!• Worked part-time local job for three years

while I built my real estate business


After 7 years of Investing

• Comfortable income and net worth• No Debt!• Stay at home dad – work from home office• Security (in knowledge, not a J.O.B.)• Take four to six vacations per year – where I want,

when I want, for as long as I want.• Rely on myself• Life revolves around my priorities and my family• “Quality of Life” Entrepreneur


My Business Plan Today

• Always have one or two personal rehabs going• Wholesale everything else• Purchase free & clear rental property• JV with students on their deals• HML with students• Keep an eye out for:

• Bargain land purchases• Bargain Vacation property

• Between me and my students, we currently have nine deals going (as of 4/25)


“What’s Holding You Back?

1. FEAR2. Financing3. Not Knowing How to Estimate Repairs


What’s Working For Me Today?

• In the world of:• Wholesaling• Rehabbing• Buy & Hold

• In the areas of:• Acquisition• Retail• Financing• Success Principles


Acquisition

• Generally, I am still using the 70% formula.

ARV x .70 – Repairs = MAO

*NOTE:• Conservative ARV based on NET sales prices and gut• “Fudge factor” built into repair estimate• I attempt to buy for less than 70% whenever possible


My Typical Rehab Today

• SFH • 4/2• Built in late 1960’s – early 1970’s• Heavy Cosmetic Rehabs• ARV in the $220’s• Upper First Time Home Buyer segment


Market Segments

• First Time Home Buyer Segment– My area: Up to $220k’s– There is success in low – mid (ARV $135-150k)

• Be careful

• Why First Time Home Buyers?– Government incentives– They’re aware of the opportunity: Historically low interest

rates & prices– Equity not there for trade-up buyers– What else exists in this price range?

• Foreclosures – How do they compare to your rehabs?


24 Marshall Rd•Purchased on 10/15/10 for $118,650 via REDC Auction•Renovation: $37k•Listed: 1/13/11 for $229k•Sale: 3/15/11 for $233,500 - $7,500 subsidy = 226k NET


1018 Floyd Ave•Purchased on 1/26/11 for $124,500 via MLS Listing•Renovation: $43k•Listed 4/21/11•Anticipated net: $225k


FOCUS

• Picking your Niche• What do you do well?• Do you have access to capital?• Do you have friends, family, SOI with access to capital?• Do you have TIME to make many offers?

• Regardless of which path you take, the highest and best use of your time should be…?


FINDING DEALS!!!

• If you can find deals, you will ALWAYS make money in this business.


Acquisition: What’s Working For Me Today?

• One word = FORECLOSURES

1. REO Auctions• NOT Trustee’s Sale (“Courthouse”) Auctions

2. HUDs3. Listed REO’s


2863 Lyon Ct.•Hudson and Marshall Auction•125 DOM prior to auction•Auction Status null & voids any open offers•eBay style auction opened; I bid through their website…


Initial E-mailHudson & Marshall to me Mar 22

Attention Buyer,

An offer has been made in your name to Hudson & Marshall on the property at (2863 Lyon Court Waldorf, MD 20602). Hudson & Marshall will process and submit the offer to the respective seller. Upon receiving a response to your offer from the Seller, Hudson & Marshall will contact you with information and next steps.

We look forward to working with you on this transaction,

Hudson & Marshall


Counter…

Hudson & Marshall to me Mar 23

Hi Steve,$103,500 was declined by seller. What's your highest and bestCASH offer?


My Reply…

Steve Cavanaugh to Hudson & MarshallMar 23

Hello,

My Highest and best CASH offer is $105,500.

Thanks,Steve


The Next Morning…Hudson & Marshall to meMar 24

Please be advised that your offer on 2863 Lyon Court, Waldorf, MD 20602has been verbally accepted. Once the contract is executed by the seller itbecomes a binding agreement.

As soon as Hudson & Marshall receives the fully executed contract, we will email acopy to you for your records. It may take up to 10 days for you to receive the fullyexecuted contract. You will also be able to download a copy of the fully executedcontract through Agent Access.

If you have any questions, please contact Hudson & Marshall. We appreciate all yourefforts and for partnering with us to ensure success of the auction program!

Thank you,(Hudson & Marshall Representative)[email protected]

mailto:[email protected]


Lyon Ct. Auction Debrief

• The auction still had ~15 days to go, but they accepted my offer.

• My MLS offer of $110k just four months prior was REJECTED!

• In two days they had a signed contract overnighted to them with EMD.

• ARV $215k• Repairs $45k


REO Auction Companies

• Hudson & Marshall• www.HudsonAndMarshall.com

• Williams & Williams• www.WilliamsAuction.com

• REDC• www.Auction.com

http://www.hudsonandmarshall.com/

http://www.williamsauction.com/


HUDs – My Method

• Have agent input bids daily• Fill out paperwork once• Investors can bid once status is “Extended”• 24 hour bid review period • HUD is going back and grabbing old bids• But, they are currently taking LOW offers • Examples…


11704 LANCELOT DRARV $185kRepairs: $30kPurchase: $80k


44816 WOOD DUCK LNARV $135kRepairs: $30kPurchase: $54k


12404 DEREK PLARV $185kHUD’s appraisal in 11/2010: $199k AS-ISRepairs: Paint & CarpetWhat am I buying for?


Analyzing a Market Using the MLS

• How to check an area for investing activity

• This process helps you determine:1. What Investors are paying for inventory2. What Investors are selling their rehabs for• What’s missing?



• Step 1: Determine a zip code or neighborhood (even better)

• Step 2: Run a search for all “Cash” sales from that area

– Analyze these results for any consistencies (e.g. same buyers, streets, purchase price)


Finding Cash Transactions



• Step 3: Run a search for all sales from the past two months.

– Look for the rehabs: » 20+ Pictures» Keywords like:

• New Stainless Steel Appliances• New Custom Kitchen Cabinets• Granite Countertops• Ceramic or Wood Flooring• Etc…

» Look at the Tax Record or Property History



• Listing Status:– Sales = what HAS happened– Actives = what MIGHT happen– Pendings = what IS happening

• Go off of Sales first• Look at Actives & Pendings next• Determining Comps = Part Art, Part Science


• Scenario:• Own/occ homes are on the market for $240k+• Comps average a $10k seller subsidy (closing help)• You feel $230k is a quick sale price for your rehab

• What do you list at???• Let’s find out…

Retail: Listing Strategy


Multiple Offers

• Ever been through the “Multiple Offer Scenario” as a buyer?

• Would you like to turn the tables and be on the other side for a change?

• How would you like to have tons of showings and multiple offers within the first two weeks of listing your rehab?


Selling your Rehab Quickly in This Market

• Some Basics:– Convey EXTREME value =• Have the nicest house at the lowest price

– Staging is a MUST!– Landscaping is a MUST!– Get buyer emotional about house


The Conventional Listing Method

• List high, have buyer negotiate you down• Make buyer request closing help• Make buyer request extras like w/d, home

warranty• After an arbitrary amount of time (month, 90

days, etc.) drop price


What’s Wrong with the Conventional Method?

• High price doesn’t convey VALUE = Instant turn off

• Most drop price when it’s too late• FTH Buyers browsing listings on the web are

confused:• About asking for closing help, extras• About offering less than list price

• Increased DOM creates stigmatized property• Doesn’t create an EMOTIONAL response in buyer


My Listing Strategy

• 80% of buyers find properties on the Internet– Most will be reviewing your listing at work– Must have nice pictures:

» Staged, Landscaped– Compelling description:

» “Green” Renovations– VERY competitive price

• List early in the week (Mon, Tue or Wed)– Get buyers looking at pictures and getting emotional before

they even get to the property.– Build anticipation for the first weekend


• List BELOW solds and definitely under other actives.

• Put in Realtor comments: "Please add closing on top of price.”

• You’re saying: “We know this is a deal, here’s what you have to do now to get it.” (pre-negotiation)

• Buyer is thinking: “This is a steal, and will be gone quickly!”

• Further incentivize a Full Price Offer (FPO) by offering a w/d or a home warranty with FPO.

• (FPO = You Netting List Price)

My Listing Strategy


When The Offers Come In…

• WAIT!• Go on vacation!• Make yourself unavailable

• Turn off phone• Don’t check e-mail

• Talk it over with a partner…In the meantime, hopefully you get another

offer…• Call for “Highest and Best”


800 Oxford Ct.•Comps at $240k•Customary subsidy of $10k

•Listed at $229k•“Please add closing on top of price.”•W/D with FPO

•5 showings in first 6 DOM; Under contract on 6th day.

•Closed $237k less $9,300 subsidy = $227,700 NET PRICE


How to Increase Your Effectiveness in the Future

• Always ask these three questions of your buyers at settlement:1. How did you find the property?

– If Internet, where? ex. Realtor.com, mobile app?

2. What did you like the MOST about the property?3. If you could change anything about the property,

what would it be?


• Private Lenders• Small, Local Banks – Commercial Dept.– 10% vs. 6% + 1Pt + uncertainty of funding

• LOC– Repairs, working capital

• Always looking for JV opportunities…

How I’m Financing My Deals Today


Keys to Success

• What’s the Best Investment You can Make?• Don’t listen to Naysayers:

• Parents• Relatives• Spouse• Employees• News

• Only listen to those who have already done what it is that you wish to accomplish.

Keys to Success

• Take Action!– Speed of Implementation

• Turn OFF the News!– Google if you must– Always get first hand accounts

• Network– www.SOMDREIG.com

• Continuing Education• Positive Thinking• Exercise



• PERSISTENCE!

The SECRET To REI

Where is Money Created?• Money is an IDEA!

• If everyone in the world demanded their money be taken out of the banks at once, would there be enough?

• Money is a number on a computer screen somewhere – it doesn’t all physically exist!

• Do you have ideas???

• You’ve already made all the money you desire – now you just have to go out and realize it!

Money is an Idea

• Profit is created when you put the deal together in your head.

• TAKING ACTION* brings the realization of that profit into being.

• *Unfortunately without ACTION your ideas are worthless.

• “If you’ve been thinking about getting into real estate investing for more than 30 days, you’re no longer thinking about getting into investing, you’re thinking about reasons to NOT get involved in investing.”

Take Action!

• Create a plan that fits you and your goals• Create little steps you can take

• Break out of your routine• Make a call tomorrow!

• The process will begin

• Consider Mentorship

• “It’s not that you can’t afford to get started

with Real Estate Investing; it’s that you can’t

afford NOT to get started with Real Estate

Investing.”

Ask The Flip Vips*

*Go to www.SOMDREIG.com, click on the Ask The FlipVIPs logo



Recommend Reading

• The Cashflow Quadrant by Robert Kiyosaki

• Think and Grow Rich by Napoleon Hill

• The Four Hour Work Week by Tim Ferriss

• The Power of Positive Thinking by Norman

Vincent Peale


Steve Cavanaugh

• [email protected]

THANKS!!!

mailto:[email protected]


steve cavanaugh investor, entrepreneur, mentor/coach, musician investing in real estate since 2004...

Documents

real estate investmentclosed

time home buyers

home officesecurity

home dad work

anticipated net

conservative arv

low mid arv

net worthno debt