How To Replace Your Income With 12 Rental Properties (Part 6 of 9)
After coaching so many people through the process of buying cashflow properties and replacing their income…
I’ve arrived at a “framework” that I have my clients follow.
This 9 step process is the most logical and effective way to build your portfolio.
So far, we’ve covered:
Step #1 - Pick Your Market
Step #2 - Build Your Team
Step #3 - Getting Setup
Step #4 - Find The Money
Step #5 - Find The Deals
In today’s email, I’m going to cover Step #6:
Analyze Deals & Make Offers!
One the wholesalers send you the deals you are asking for, it’s important that you take action on them. The last thing you want to do is ignore their emails.
That will destroy the relationship and your chances of getting future deals from them.
So, you need to take time to analyze the deal, and MAKE AN OFFER.
It doesn’t have to be your final offer, just give them what you think you could pay, contingent upon getting inside the house and doing your due diligence (with a contractor and inspector involved.)
Here’s the keys to analyzing deals and making offers:
1. Store Your Leads Somewhere - I like to keep my leads in Podio or Trello, versus just having them floating around in a bunch of emails everywhere. I have my office manager put all the current wholesale deals that meet my criteria into Trello, and only then do I go in and come up with those initial offer amounts. Keeps everything nice and organized.
2. Find GOOD Comps - You need to be realistic here. This is YOU buying the property, so why would you be overly optimistic or inflate the numbers in any way? I know you’re excited to buy houses, but good investors are DISCIPLINED. Look for comps that are within ½ mile of the subject property, nearly the same square footage, same bed/bath combination, same curb appeal, same street quality, roughly the same lot size, and most importantly, in roughly the same CONDITION as your subject property. Check off all those boxes and you should have yourself an “apples-to-apples” comp.
3. Check Rent Amounts With Property Manager - Property managers in the area are often a great source when it comes to knowing how much your future rental property will rent for. They sometimes lowball it just a bit, because that favors them (if they rent it for less, the tenant has an easier time paying, turnover and late payments are reduced, and it doesn’t subtract from their bottom line that much). I find that I can usually squeeze an extra $50-100 per month on top of what the property manager tells me it will rent for.
4. Make Offers Based On CASHFLOW Above All Else - It’s nice to have equity, but cashflow is king. You’re never going to be able to quit your job unless you have mailbox money coming in to cover your bills, right? That’s why you make offers so that, if it gets accepted, you should have $200-300/month in NET rent that you can put in your pocket.
5. Negotiate - It’s true what they say, that negotiation is the fastest and easiest money ever made. If your offer isn’t low enough to make you a little embarrassed to say it, then lower it. You can always raise your offer later, but you can never LOWER it. Remember that. I’ve made hundreds of thousands of dollars in equity over my career just by leaning into that uncomfortable feeling and offering the amount I REALLY want to get the house for, NOT the amount I think the wholesaler will be happy with. Stop being a people pleaser.
6. Contingencies - Make your offers CONTINGENT on getting an inspection done. Make the earnest money set to go hard (meaning non-refundable) only AFTER the inspection period is over. For example, if you go under contract today and have to mail a check to the title company for 1K earnest money, negotiate 14 days to get your contractor and inspector in the house and get their reports back, BEFORE the earnest money goes hard. So within that 14 day window you can back out of the deal and not even lose your 1K.
Alright, those are the basics. Now go out there and start putting this into practice. Make your first offer.
If you are interested in a more comprehensive training on how to analyze deals and make offers, check out our 12 House Masterclass which includes not only includes a module on this, but also:
• A comprehensive 50+ video training course on how to get your first 12 houses
• Bi-Weekly group coaching calls with me
• Access to our private, closed Facebook Group where you can ask questions to your heart’s delight
• Access to my private money lenders
• My 2018-2019 Best Markets Report
• Coaching Call Recordings
• A “Freedom Artist” T-Shirt
• And much, much more!
In my next post, I’m going to cover Step #7 to getting your first 12 houses, which is…
This is the step that happens AFTER your offer gets accepted and you go under contract.
Look for my next post.