All Forum Posts by: Michael Evans

@Brent Coombs Our system is a mathematically-backed system that calculates all of the costs and cash requirements for the project (including sales costs and profit) and compares it the ARV. if the total project costs are more than the ARV, it returns a Red light and we pass on the deal. As long as we follow the system's Red light/Green light signals, there's no way for us to lose on a deal. Even if the ARV is wrong (which we verify using either a Automated Valuation Method report or an actual appraisal) and we can't sell the property, our buy and hold company is always willing and ready to buy the property at a predetermined price, which includes the flip company's 25% cash-on-cash profit. The buy and hold company doesn't care about the ARV; it's concerned about it's cost basis of the property as it relates to the monthly rent and it's ability to make at least a 10% annualized cash-on-cash ROI after taxes.

I don't like to say that the system is bulletproof...but it seems to be bulletproof.  We are now doing two very difficult "proof of concept" properties that have very small margins and high loan costs compared to the loan amounts.  If our system works under these conditions (Worst Case), then we know it work in better conditions.  Once we complete these two deals, we will open up our books to our Southern CA network of personal relationships (hedge fund managers, pension managers, high net work individuals and investment clubs) to raise an initial $5 million, which will allow us to buy about 15-20 houses per month for 3 months.  Then we will raise $100-$200 million in order to scale up to buying 100-200 homes per month over 20 markets throughout the U.S. starting in January 2018.

@Mike Flora How w.

Would you like to be the bank and earn 10% on your line of credit money that costs you 4.7%.  You make over 5% on the spread without having to touch any property (don't have to worry about marketing).  Or if you have a higher risk tolerance, earn at least 25% in six months or less.  Send me a message if you're interested.

Stay Blessed!

I use leverage to the extreme. I use 100% financing for the purchase, closing costs and rehab costs, to where my flip company pays up front out of pocket costs (inspection and appraisal), points on the 2nd mortgage, and 6 months' worth of holding costs. We come in with less than 10% of total project costs using hard money loans and we generate at least a 25% cash on cash ROI within 6 months. We have numbers on deals where will we more than double or money in 6 months because of leverage. We have two properties under contract in Tulsa, OK where we will make 25% ROI in less than 6 months on the first one and at least 100% ROI in 6 months on the 2nd one.

Stay Blessed!

I use a variation of the 70% rule:

Maximum purchase price = (ARV - Rehab) x 70%

Example: for a property with an ARV of $100,000 and rehab costs of $15,000, the maximum purchase price would be ($100,000 - $15,000) x 70% = $59,5000. My business partner and I spent the last two years developing a Real Estate Deal Management system around this ratio. The property also has to have a rent:ARV ratio of at least 1.3% ($100,000 ARV must rent for at least $1,300 per month). We are finding properties in the Midwest and South all day long that meet this criteria. They are in C-class areas, which are our preferences. We rolled this system out in April 2017 and have two properties in Tulsa, OK under contract using this system.

Stay Blessed!

You want to calculate your cash-on-cash Return On Investment (ROI) on an annualized basis. I use the following example: You have $100,000 to invest. Do you invest it and buy a $100,000 property that generates $15,000 in net income per year for a cash-on-cash ROI of 15%, or do you buy 10 properties that cost $100,000 each and each one generates a net income of $10,000 per year based on you using leverage to invest $10,000 in each property by getting a loan of $90,000 for each property (assumes $5,000 per year in financing costs)?

In the second scenario your $100,000 generates $100,000 in a year (ROI = 100%) due to leverage. I use leverage exclusively in my investing because it supercharges ROI and it shifts risks. Would you rather put all of you $100,000 into a single property or into 10 properties and spread the risk?

Leverage is a tool like fire.  It can be used to create great wealth or it can be used to destroy it.  Be careful how you use it.

Stay Blessed!

I did a pre-construction flip in Palmdale in 2004 where I turned a $7,000 cash Investment into $182,500 of equity in 18 months. In 2005 I helped two friends each turn $10,000 into $25,000 cash in 4 months and $50,000 cash in 6 months, respectively.

Now 12 years later I'm doing it again. I have 6 pre-construction properties under reservation in Santa Clarita, CA.  Each property will have a purchase price of about $850,000 (over 4,200 square feet). I put $5,000 down on each property.  It will take at least 4 months (probably more than 6 months) for them to build the properties (they don't even have permission from the DRE to sale these lots and they haven't pulled permits from the City).

In the meantime, the builder will continue to sell more properties at increasing prices.  We will wait until about 2 months before they are scheduled to complete the houses and we will market the individual purchase contracts to buyers who are willing and able to pay the price that the builder is offering houses at that time, but don't want to wait 4-6 months for a house to be built.  The buyers will use our purchase agreement to purchase the property and will pay us the difference between the price that the builder is offering and our purchase contract price.  Since we "own" the purchase contract for $5,000, we only need the builder's new price to increase by $5,000 for our purchase contracts to have equity.  That less than a 1% increase in 4 months on a $850,000 purchase contract.  Prices in this tract increased by $30,000 in the month of March 2017!

So I need a $5.4 million Proof of Funds letter ($900K per property) showing that my company has the capacity to purchase these 6 properties as a cash buyer. I can also use separate letters of $900K each for each property since each property will be controlled a separate LLC. So here's the deal:

• We will not actually use your funds, just your POF letter
• We will pay either a flat fee that will be paid upon closing of the purchase and sale of the property, or
• We will split the profit 50/50.

I have another community in Temecula that we will be doing the same thing over the summer (about 10 homes with a purchase price of around $750k each for $5,000 each), so I will need to reuse the POF letter (date will need to be updated.

Contact me directly at 831-760-6711 and I will go over more details.

Stay Blessed!

Very interesting model. I also do not believe inputting equity into a house. The only way to take equity out of the house is either to sell the house and incur sales cost or to take a loan against the equity incur interest costs. Why put the equity in the house the first place?

I've developed a 30 year lease purchase program where the buyer put a down payment 11.5% and has the option to purchase the house at a fixed price for the next 30 Years. They now earn 10% interest on their deposit and mathematically in 30 years due to compounding their deposit will grow to equal the purchase price of the house. In the meantime they leased the house on a year by year basis. Their deposit is non-refundable but all of their interest is theirs to take whenever they want to. The interest they earn is equal to their equity. In this scenario they know that their Equity is earning 10% every single year.

I am basically buying money at 10% interest per year and I invest that money to generate 25% returns in 6 months. I buy money low and I sell money high. Tell me what you think of that?

Stay Blessed!

You can add me.

Stay Blessed!

Please add me at [email protected].

Rancho Vista, west Palmdale. Either near the golf course or in a gated community near Ave N. and 50th St. W.

Stay Blessed!