Investing Success by Zack Wiest by Zack Wiest

Real Estate Investing Success Series. © Copyright 2010 by Zack Wiest. All rights reserved. No part of this book may be reproduced in any form or distributed without the expressed written consent of PA Deals, LLC c. Provided by PA Deal, LLC Price $97.00

Part 1 What type of investing is best for you? When getting started in real estate investing so many things come at you at once that it can be an intimidating process. It may look a little like this: What techniques will I use? Should I wholesale? Retail? Wholetail? Hold? Pre-rehab? Rehab? Take properties subject to? How about lease option? Or sandwich lease option? Should I buy short sales, pre-foreclosure or foreclosures? How do I acquire? I could buy with cash, credit, hard money or even try to raise private money. What about transaction funding? Should I buy personally? Maybe an LLC? Or maybe even a land trust? Partnership maybe, or how about S-Corporation, nah maybe a C! What type of deals should I buy? Singles? Multi’s? Mobiles? Condo’s? Townhomes? Commercial buildings? Industrial? Land? And that’s just a portion of what entered my mind after my first 2 day seminar back in 1999! Getting into real estate investing can prove to be the best decision you will ever make but it can also be frustrating, especially early on. It takes work to be successful. Real work! For the most part this is not a passive investment. Even when working with professionals who will be doing most of the heavy lifting, you still have to be involved in your success. That brings me to my first point and arguably one of the most important first steps to becoming a real estate investor. What type of investing is best for you? In order to answer that question you need to do a self analysis and financial analysis. Not all real estate investing will work for everybody. For instance, if you are someone who has very little cash reserves, you probably don’t want to build a buy and hold rental portfolio right away. Why? Because who’s going to pay for the roof when it leaks? How about the mortgage when your tenant doesn’t pay you? Let’s take a look at the questions you need to ask yourself before you even think about getting involved in real estate, even with PA Deals. Self Analysis: How much time per week can I dedicate to my investing business? What knowledge do I posses that will assist me in my real estate investing business? What knowledge must I obtain in order to feel comfortable investing in my first property? 2

Do I like dealing with people? Do I hate it? Who do I know that can help me succeed as a real estate investor? The above are just a few of the questions you need to be asking yourself before you begin your investing career. Once you have identified what you are ok with, now you must ask yourself some serious financial questions. The last thing you want to do is get a part time job to pay for your real estate mistakes. Ask me how I know!!!!!!! Financial Analysis: I have $______________ available in the form of cash reserves in order to begin my real estate investing business. In addition to my cash reserves I have $_______________ of disposable monthly income that I can use to pay for any unexpected costs or holding costs associated with my properties. My credit score is __________ therefore allowing me to borrow or not borrow money from a lender should it be required. Depending on what category you fall into will determine what real estate investing techniques are best for you. Realize, as your personal situation changes, so will the techniques available to you. Below is a broad based overview of what techniques apply for certain groups of people. Although there are a hundred and one ways to profit in real estate investing, for these purposes, I am going to focus on 4 techniques that have been time tested, and give you the criteria for using each technique. Bad Credit, No Money -

Wholesaling is your best friend. This is really the only technique you should be using. After a few wholesale deals use the profits to repair your credit. Once your credit is repaired begin to build cash reserves in order to utilize other techniques.

Bad Credit, A Ton of Money -

If you are this person you have a few options. They are, in my opinion, wholesaling and buying, fixing and selling. Sure you could buy a property and rent it out but what’s your exit strategy to recoup your investment capital if you have bad credit? You don’t have one so your money is going to be tied in one or two properties and you’re out of business. It is this reason I would suggest wholesaling and retailing [buying, fixing and selling] until you repair your credit.

Good Credit, No Money -

If you are this person you can probably apply for and obtain a small line of credit to get you started. Once you have obtained that money, deposit it in the bank and use it to prove to your hard money lender that you can service the debt and carrying costs on their loan. Because you don’t have much cash reserve however, you don’t want to put yourself into a situation where you have to borrow money conventionally as that might prove difficult. Because of this fact, I recommend only wholesaling and buying fixing and selling. Be careful when buying fixing and selling. Make sure you have enough in whatever line of credit you obtain to cover at least 12 months worth of holding costs plus some “what if” money for cost overruns and unexpected expenses [they always happen].

Good Credit, A Ton of Money -

If you are this person then first of all, congrats, you’re awesome. You are also, because of your responsible behavior, eligible for all real estate investment strategies including but not limited to, buy and hold, rent to own, buy fix and sell and, if you dare, wholesaling! When you have good credit and sufficient cash reserves all techniques make sense financially. The trick is to determine what techniques make the most sense for YOU. If you hate dealing with people then you might not want to buy and hold and become a landlord. Conversely if you love people you may just want to! This is where your self analysis comes into play and while it most certainly comes into play for the other people we mentioned it really means the most to you because all options are available to you.

Most people spend more time planning for their vacation every year than they do their financial future. Don’t be one those weirdo’s! Take a quick self analysis and determine what investing best compliments you. Then take a look at your finances and decide where you stand. After honestly answering some of the questions here, plus more if needed, make a logical decision as to what technique [s] you will start out with. Once you have decided what that answer is, your next step is to set goals. I know, it sounds trivial, but it is not. Goal setting is paramount to your success and a major part of getting started as a real estate investor.

Part 2 Logical and meaningful goal setting Goal setting is something we as adults have dealt with hundreds of times. We were challenged by our teachers, our parents, our pastors, our mentors, our friends and our spouses. Sometimes goals come in the form of real goals, sometimes they came in the form of “to do’s” and sometimes they came in the form of “must do’s”. Either way we have all dealt with goals many times throughout our lives. Goal setting is the tool #1 when it comes to your real estate investing plan. It doesn’t matter whether you are brand new to the business or a seasoned pro goal setting is critical to your success. These goals come in two forms, personal and financial, and more than likely you will achieve one by achieving the other. Everyone’s situation is unique, and so are their goals. In the next few paragraphs I will layout two simple exercises for you to put into place that will help you start achieving your goals. In the first exercise I want you to draw three columns. Label one personal and the other financial. On the left side of the page write vertically down the page 30 days, 60 days, 90 days, 6 months, and 12 months. For each time period I want you to write at least one personal goal and one financial goal. It should look something like this: Personal

Financial

30 Days 60 Days 90 Days 6 Months 12 Months Now, that you have determined what Personal and Financial goals you want to achieve over the next 12 months, it is time to look at how Real Estate Investing can help you achieve them. I want you to now draw two columns and label one Real Estate Goals That Will Lead To Me Succeeding With My Personal and Financial Goals, and the other column list the same time periods as before. It should look like below. What I want you to think about here is exactly what it says, looking at your personal and financial goals what can you do in the next 30 days, 60 days, etc. through Real Estate Investing that will allow you to achieve them.

Real Estate Goals That Will Lead To Me Succeeding With My Personal and Financial Goals 30 Days 60 Days 90 Days 6 Months 12 Months Part 2 of the exercise that I want you to implement right away will begin to condition your mindset and attitude and help you achieve these goals. Place these two documents somewhere you will see them every day at least once if not 25 times. I want these Personal and Financial Goals on your mind all the time, and how you plan to achieve them through real estate laying right beside them. Visualize how it will look and feel when you accomplish your 30 day goals, and how what you wrote on the Real Estate Goals document made it possible. Use the “Theater of the Mind” and construct mini movies in your head that you’ll close your eyes and watch every morning and every night. Try it, it’s a blast! Now, comes the most important part. Every evening write 3 things you want to accomplish the next day on a piece of paper leaving room for you to write the next day’s 3 things below it. Place this “to do” list right beside the other two documents. Make the 3 things you want to accomplish each and every day able to be accomplished. At the end of the day I want you to go to these three documents and draw a line through the 3 things you completed that day, and write the next day’s 3 to do’s and repeat this process day in and day out and start to visualize what your goals will look like when you are crossing them off as completed, and how that will feel. Continue this process until you have completed all of your goals. Here is what I hope you do not do, and that is NOTHING! I know as you read this Personal and Financial goals were flashing through your mind – “Write Them Down” I want you to achieve these goals as much as you want to achieve them, maybe more! Don’t know about you but no one and nothing is going to stop ME from achieving MY goals! You with me?

Part 3 Preparing yourself for business in today’s world. To be a successful real estate investor in today’s ever changing world you are going to need to embrace some technology, no matter how much you despise it. In order to prepare yourself for operating your real estate business in the most effective and efficient manner possible, you will need the following, sooner than later. Computer – as a real estate investor you will use your computer a lot! Estimated cost $900. Dedicated e-mail address – e-mail should be one of your primary means of communication. Estimated cost - $0.00 Microsoft Office Standard with MS Word, MS Excel. Estimated cost - $200. QuickBooks Pro – you will use this program to track all financials on your properties. Estimated Cost - $150 Smart phone – simply a cell phone with e-mail, text and internet capabilities. Estimated Cost - $100 Digital camera – Canon Powershot suggested . Estimated Cost - $200 Fax machine – Estimated cost - $100 “The Flip” Video Camera – Estimated Cost - $150 Total estimated cost for items above - $1,800 Having all of the above tools will allow you to communicate and navigate through any situation as well as perform all the basic functions of a real estate investor. For the cost, you really can not afford to operate a business without these tools. Don’t be cheap! Go out and prepare yourself for operating a business in today’s technologically advanced, fast paced world. At the end of this Investing Success Series, I will show you how to implement all of the stuff we talk about but without the above tools you are going to be lost. If you’re serious about your investing future arm yourself with the proper tools.

Part 4 Setting up your success team of real estate professionals. You’ve heard the saying “It’s not what you know, but who you know” right? Sure you have, and in so many ways this saying is true. If I look at my company today [we’re killing it] and compare it to what it was back in 2001 [we sucked] I notice night and day differences. Sure, systems have improved and we’ve gotten better at what we do over the years but I think the most significant change has been the people we do business with. The caliber of person we deal with today is much higher than that of years past and because of that we are much more successful, so are our clients! Knowing your team can literally make or break you, you must be diligent in assembling the proper people to work with. Below is a list of people you will want to build relationships with now and in the future, in order to succeed as a real estate investor. Real Estate Agents Real Estate Attorneys Real Estate Accountants Real Estate Appraisers Title Companies Home Inspectors Local Lenders National Lenders Hard Money Lenders Private Lenders General Contractors Specialty Contractors Electricians Plumbers Roofers HVAC DryW allers Landscapers Trash Haulers Auctioneers Engineers Insurance Agents Property Managers Other Successful Investors / Your Mastermind

When assembling your team you will want to look for specific criteria. Some of that criteria is: Industry knowledge Experience and expertise Communication skills Pleasant personality Your team will play a huge role in your success, so select them wisely. Don’t worry if you don’t get it right the first time. I’ve been through dozens of real estate agents and even more contractors. After enough time in this business you will find your success team and once you do you will be way ahead of the game. Just so you know, if you were to become a client of The Investing Cube you would get immediate access to all of our “people”. Yup we have “peeps” and they are the absolute best in the business! Become a client of PA Deals today. Get pre approved right now at http://www.padeals.com/ or register for our next FREE event where you’ll learn all about what we do, how we do it and how you can be part of it with us!

Part 5 The Mastermind Principle Now that you have begun to build your team of real estate professionals it’s now on to creating what could prove to be your most important alliance ever! That alliance is with people who you will form a mastermind group with. The concept of the Mastermind Group was introduced by Napoleon Hill in the early 1900's. In the book, "Think and Grow Rich" he wrote about the Mastermind principle as: "The coordination of knowledge and effort of two or more people, who work toward a definite purpose, in the spirit of harmony." Think of it as a group of people, small or large, that you are in complete harmony with and who truly have your best interests at heart. These people can be friends and family, business associates or complete strangers as long as you share a common goal, such as succeeding as a real estate investor. Not everyone you “mastermind” with will be best for you, but if you give it your all, you are sure to build lasting relationships with people who can help you get to where you want to go. Now, in return for them helping you, you must help them. There is a something to be said for brainstorming with other people. Ideas, concepts and solutions seem to be in abundance when you are mixed with the right group, when there is that synergy in the room. It is amazing to me what my organization has been able to accomplish in simple Monday Morning Meetings, which sort of act as a weekly mastermind meeting. The right mastermind group will keep you going when times are tough. The right mastermind group will keep you motivated when you are not. The right mastermind group will give you solutions to your problems when you think there are none. The right mastermind group will get you to where you want to be when you thought it wasn’t possible. I will admit I do not use mastermind groups or the mastermind concept as much as I probably should. I do however truly believe that every time I have, whether in small or large groups, that it has helped me tremendously and I strongly urge you to either create one or join one. Mastermind groups are becoming more and more popular, especially in larger cities. Seek them out or create your own and see what amazing things happen when you begin to implement this concept into your everyday life.

Part 6 Preparing yourself for success. Success is as much about mindset as it is about specialized knowledge. More so actually! You can have all the technical knowledge out there, but if you don’t believe in yourself and your business you are not likely to succeed! How many people do you know that know LESS than you but make MORE money than you? A lot, right? Well that’s because THEY have prepared themselves for success. Now it’s your turn. Cool? About the only thing I had going for me back in 1999, which was the year I entered the world of real estate investing, was self belief. Somehow, even after having a rough childhood, being a very poor student, never attending college plus having several run in’s with the law due to making some very poor decisions at a young age I still had belief that I would one day, somehow, someday become successful! I remember from about age 17 constantly looking through Robb Report and DuPont Registry fantasizing, dreaming, hoping, wishing, visualizing about cars, homes, nice clothes, nice trips! Some how, even though at age 20 I had totally screwed my life up, I kept the dream alive that someday I was going to live the good life. There is a song by one of my favorite young artists called “Somehow, Someday” and that was literally my theme song for many years. My “somehow” was real estate investing and my “someday” was about April 2004. My self belief and constant affirmation of it, is probably about 90% of the reason I am able to write this article today as a self made, extremely successful real estate investor! While I sort of had an inner, humble confidence I also stumbled onto some very powerful information that took my mindset to the next level. Out of all of the self help books I’ve read, the absolute best one out there, in my opinion is Napoleon Hill’s book Think and Grow Rich. When I read that book I was floored! I thought, “Holy crap I had just stumbled onto a secret that would forever change my life” and it basically did. If you have not read this book stop reading this article right now, go to the bookstore and BUY IT! For real, go right now. NOW! After you have read the book please APPLY its teachings. If you do, I guarantee you, your life will never be the same. In addition to that book I must also highly recommend a movie by Rhonda Byrne called The Secret. This too, is life changing. I am not qualified to teach you how to change your mindset and program yourself for success but these two resources will do that for you. So, go get’em, read’em, watch’em and apply’em, then send me a thank you card. I love Red Lobster too as an fyi [those biscuits!!!!]

Part 7 Real Estate Investing Strategies 101 If you entered your e-mail address into even one website offering an investing course, e-book, webinar or the like, than you probably get bombarded with offers everyday selling the latest and greatest real estate investing technique. In all honesty I don’t mind receiving these types of emails and am actually on several peoples list. Some are good, some bad and some are just plain annoying. The point to all of this is that there are tons of ways to make money in real estate and for the most part, all of the strategies are legitimate and worth learning about. Here at The Investing Cube however, we only focus on three types of real estate investing, well four actually but we only teach three. The three strategies we encourage our clients to use are: Buy and Hold Buy Fix and Sell Rent to Own These techniques are timeless. They worked decades ago and will work decades from now. They are the foundation in which all other techniques are built from. Let’s take a look at each technique briefly and identify the attributes of each. Note – In future sections of this series we will get into great detail about each one of these strategies, for now though, just the basics. Buy and Hold - This is certainly not the quickest way to wealth but it is definitely one of the safest and easiest strategies to implement. Buying and holding a property is simply when you acquire a property for the purposes of renting it out and using the monthly rental income collected to offset your expenses associated with owing the property. In a perfect world your monthly rental income will cover all of the expenses plus leave you with a positive cash flow. This strategy is not to be used until you have adequate cash reserves as getting a part time job to pay for your rental property is no fun. Ask me how I know! Buy Fix and Sell – Buying fixing and selling goes by many names. It’s commonly called “flipping” and sometimes called “retailing”. When using this strategy you identify a property located in an area that has a high likelihood of appealing to an owner occupant. You acquire the property for as cheaply as possible and renovate it, bringing it up to acceptable market standards. Once complete, you market the property or hire a real estate agent to sell it. The objective is to sell the property to a willing and able buyer as quickly as possible and for the highest possible sale price, therefore maximizing your profit. Rent to Own – The Rent to Own strategy is a hybrid of the Buy and Hold strategy and the Buy Fix and Sell strategy. When using this technique you are offering your property to a tenant / buyer [tenant today - buyer tomorrow] on a lease agreement while simultaneously giving them 12

an option to purchase the property for a predetermined sale price and for a predetermined amount of time. This is not the time or place to get into great detail but please realize right here and now that only a percentage of these deals actually come to fruition. The deals that donâ&#x20AC;&#x2122;t close either end up being converted to a Buy and Hold rental or vacated, spruced back up and set up on a Rent to Own agreement all over again. These three strategies alone are enough to build a lifetime of real estate deals. In fact most old school investors only use these techniques. Most old schoolerâ&#x20AC;&#x2122;s balk at some of the more creative techniques used today. If you are new to the business I would recommend you learn the ins and outs of these techniques as they are absolutely the basis, foundation for all other techniques out there. If you master these the rest will come easy. Since 1999 I have been using these exact techniques in conjunction with my wholesaling business. Lately, last 3 years or so I have been concentrating more on Buy and Hold and Buy Fix and Sell but Rent to Own is a very viable strategy as well, just not one Iâ&#x20AC;&#x2122;ve been using lately. The next 3 lessons are focused on the details of each one these strategies.

Part 8 A closer look at Buy and Hold Ok, for all of you who prefer a tried and true real estate strategy that can pretty much weather any storm Buy and Hold is it. The Buy and Hold real estate investment strategy has been around since the beginning of time. It is, in my opinion, the safest, most proven way to true wealth. It is the strategy I use day on and day out in conjunction with my wholesaling business. Let’s take a look at all of the pieces of a Buy and Hold deal. Key Players The Landlord - This is you, if you use this strategy. The Tenants – These are the strange people that will move into your property and hopefully pay you rent each month. One guru once called them Aliens from another planet, and in a lot of ways he’s right, although as a landlord myself I have and have had many great tenants. The Lenders – These folks will make it possible for you to make money, using their money. Pretty cool, right? OPM baby! [other peoples money] The Property Manager – These are the people who will help you keep your sanity over the years. After you have got your feet wet by managing a few properties yourself, I always recommend enlisting the help of a professional property manager. Pro’s The potential of creating passive income through monthly positive cash flow. If you have a loan, each month you will pay down the principal of your loan with your tenant’s money thereby creating equity. Historically properties appreciate so there is a real chance that over time your property will increase in value. Owning buy and hold real estate entitles you to some pretty sweet tax benefits, not available to you with any other investments. Owning real estate long term is a great way to diversify your investment capital.

Con’s Bad tenants who don’t pay on time or pay at all. Bad tenants who trash your house. Poor property managers who do not manage your property as thoroughly as you would. On going maintenance issues. Buy and Hold Step by Step Property selection – When you are selecting a property to hold as a long term rental you want to look a several key factors. Number one is location. You want a property that is located in a stable area that will attract a quality tenant. Quality tenants want to live in quality areas, it’s that simple! Next is the property itself. Do not buy a property that does not fit the neighborhood makeup. This means if all properties are 3 bed 2 bath homes, do not but they only property that is a 1 bed 1 bath. It just doesn’t make sense. Finally, only buy properties that are fundamentally designed to appeal to the masses. This means those homes where the only bathroom of a three story home is located on the first floor behind the kitchen are out! The homes where you have to walk through one bedroom to get to the next or walk through the bathroom to get to the other bedroom, there no good either. These types of homes are just not going to appeal to most people and you don’t want to buy these homes for the long haul. Keep your purchases in good areas, acceptable for the neighborhood and mass appealing. Financing – Financing is key to creating positive cash flow. Positive cash flow is very important because it equals passive income and the more passive income we have the sooner we can retire! When selecting financing I am going to suggest three things: 1] Fixed rates only. No adjustable rates when buying and holding. 2] Escrow taxes and insurance. It just makes it easier, trust me, do it. 3] Stretch payments out as long as you can. If they offer you a 30 year term TAKE IT. Why? Because you can always pay more but you can’t pay less. So if you take out a 30 year loan but have the money and want to pay more to decrease that to 20 years, then by all means go right ahead. However if you took a 20 year and times get tough, now you are stuck at that higher payment. Get it? Good!

Tenant Selection – I could write for days on this topic and it still wouldn’t help. The reason is because sometimes the people who look the worst on paper are the best and the people who look the best are the worst! Here are some general guidelines to follow but sometimes your intuition about someone will prevail. Credit history – I’m ok with a few credit issues but not for things that affect housing such as judgments for evictions and utility collections. A medical bill here and there, late credit card, ahh, who cares. If they were perfect they wouldn’t be renting. Employment – First off they MUST work. Go figure. How dare we expect them be working? Second is the length of their employment with their employer. I really like to see at least 2 years steady. This shows responsibility and goes a long way with me. Current housing – Are they living in an area that is comparable to where your rental home is located. Why are the moving? What does their current landlord say about them? Note – Some landlords want tenants gone so bad that they will lie to you getting you to approve them so they will move out of their property. Use a little trick and say, “Is it true they pay $500 per month” [when you know it’s $400] or “So they have lived here for 2 years” [when you know it was only a year]. If they agree with the wrong answer then you know you can’t trust this information and you must rely on the other research. Your intuition – If someone comes in and you get bad energy from them, then so be it, don’t rent to them. If you get great vibes then maybe they are just right for your property. Trust yourself to be a good judge of character and go with your gut but do not let it be your only deciding factor. Management- You are not only managing your property but you’re managing your tenant. In order to properly manage your buy and hold portfolio you need to lay down the ground rules from day one. All of your rules, regulations and terms should be clearly laid out on your detailed, easy to read and understand lease. From there you need to create detailed systems, procedures in which you will follow. You need to create procedures for: Tenant Screening / Tenant Placement Move In / Move Out Maintenance Call / Emergency Situation Late Rent / No Rent / Eviction Record Keeping / Bookkeeping

To create systems and procedures it sometimes help to create what we call Mind Maps. You can create them for free at www.bubbl.us I recommend QuickBooks for accounting and Rent Right www.rent-right.com for property management record keeping. Well I hope this has helped you determine if Buy and Hold is right for you. Buy and Hold is a strategy that has worked for me. I currently own over $2,100,000 in real estate and will continue to acquire properties for many years to come.

Part 9 A closer look at Buy Fix and Sell Buying Fixing and Selling has received much attention from the media over the last couple of years. HGTV and The Learning Channel both have many shows focused on this exact technique. [Note – Than Merril’s Flip This House season was the best one of them all] This is a technique, that if executed properly, can make you rich and quick! Yeah I said it, Get Rich Quick! What’s wrong with that? Buying Fixing and Selling also goes by flipping and some people, including myself call it retailing. For these purposes let’s abbreviate it BFS. When using the BFS technique you are acquiring a property that needs work, fixing it up and selling it for a profit. Sounds easy right. Well sometimes it is and sometimes it isn’t. Last year I did 14 BFS deals. Perrty decent. Here’s how they worked out: I lost money on 2. Total loss was about $25,000. I essentially broke even on 2 others. No money made but no money lost. I made money on 10 totaling about $150,000 net profit. I am admitting I lost money on 2, and broke even on 2 to let you know that no matter how smart you think you are [I think I’m pretty sharp nowadays] or how well you know this business [I have done over 800 deals] you still can’t guarantee yourself success on every deal. Real estate investing carries some risk with it and the sooner you realize that, the better. Please reread that last sentence and possibly tattoo it on your forehead, or at least your forearm. Now that we have cleared that up, let’s talk about what you need to know to have a chance at success. Property Selection – Selecting the right property to BFS is vital to your success. Start with the location. You want a property that is located in an area that is primarily occupied with owners NOT tenants! Reread that last sentence if you have never done a BFS deal, it’s that important. So now that you have determined an area that lends itself to successful retail selling try to pick a home that has mass appeal. In my market that means you want at least 3 bedrooms and no less than 1.5 baths. Each market varies but make sure your property will appeal to the masses in your target demographic. Finally, buy properties that feel good. You know what I mean. Sometimes you walk into a house and you just don’t feel good. Maybe the rooms are too small, ceilings too low, bathroom too small or kitchen improperly placed. Don’t buy these houses to BFS. Buy houses that feel good! If you are unsure and have no sense of what feels good take your wife. If she is no help, take your mom. Mom always knows.

Running the Numbers – Have you seen your local wholesaler offering the “best deal of the year” lately and running numbers that looked like this? After Repair Value $100,000 Sale Price $80,000 Repairs $10,000 Your Profit $10,000 !!!!! If so, call the police right now because you have a crook on your hands! Enough said about that. Here is how you should analyze a BFS deal and coincidently, this is exactly how we, at The Investing Cube do it on every one of our deals we wholesale! After Repair Value minus all of the following: Sale Price Closing Costs Transfer Tax Points Pro Rated Interest Title Insurance Closing Fees Etc Etc Etc Homeowners Insurance Repairs Needed Holding Costs – length of time varies according to your local market Mortgage Payments Property Taxes Utilitie s Etc Et Etc Sales Costs Real Estate Agent Commission Sales Costs Inc Transfer Tax Equals your: Projected Net Profit! And that’s it folks! There is no other way to analyze a BFS deal. Use this formula, be realistic with your numbers and more times than not, you will succeed. 19

The Rehab – The next lesson is focused on Rehabbing so please, save me from unnecessary typing and wait until the next lesson for this part. Much appreciated. Property Preparation – Once your rehab is complete now comes time to prepare your property for showings. At bare minimum you will want to: Do a thorough walk through checking to make sure everything works. Perform a thorough cleaning of the property. Place air fresheners throughout. Stage the property for maximum showing appeal. Marketing – As the final step to BFS successfully I am going to suggest you not take on the task of marketing your property. See, unless you are a licensed real estate agent you are going to miss out on the most proven method of marketing your property, the MLS. The MLS stands for Multiple Listing Service and is used nationwide by real estate agents. Once your property is listed on the MLS it is available to all agents. While I do not suggest you market your own properties I do suggest a few things you should have your real estate agent do. They are: Post flattering pictures on the MLS Listing Post Virtual Tour or Video on MLS Listing For Sale sign in yard Directional signs surrounding the neighborhood Hold several open houses Have Info Box flyers in front yard BFS is an awesome way to create quick cash profits. As long as you follow a few simple rules, some of which are discussed here, you should do just fine.

Part 10 A Closer Look at Rent to Own Ok, so we’ve learned about Buy and Hold and Buy Fix and Sell and I hope you agree they’re both awesome money making strategies. From time to time though you’ll buy a property with the intention of using one of those strategies and for whatever reason it won’t quite work out. If you are faced with a situation such as that you do have a Plan B strategy and it’s called Rent to Own. What is it? The Rent to Own technique is a hybrid between the Buy and Hold technique and the Buy Fix and Sell technique. There are aspects of each strategy found in the Rent to Own technique. When using this technique you are simply leasing your property to an interested party and giving them the option to purchase the property from you sometime during the lease period. We call this interested party a tenant/buyer because they are a tenant today and hopefully, a buyer down the road. Don’t confuse option with obligation. When using this technique your tenant/buyer has no obligation to buy, but they do have the option of buying, if they so desire. The reverse is true for you. Should your tenant / buyer decide to exercise their option to buy you must sell the property to them. We call this a unilateral contract and you, as the landlord / seller are obligated to perform in the form of honoring your tenant / buyers option. Who do we use this strategy with? Your target market when selling properties on a rent to own agreement are hard working, honest people who for one reason or another have credit issues that are preventing them from obtaining a mortgage to buy a house the conventional way. Due to their credit issues they are willing to pay a premium to you in order to at least have a fighting chance of realizing their dream of homeownership. When screening a prospective tenant/buyer for one of your properties, you want to look for the following criteria: a] Steady Employment – They will need a steady job that pays a decent salary in order to eventually qualify for a mortgage to buy your property. They should be at their job for at least a year, and / or at least in the same profession for a year or more. b] Debt to Income Ratio - Their debt to income ratio, using their new monthly house payment should not exceed 50%. To figure out debt to income ratio add up all of their monthly payments that appear on their credit report and divide that number by their gross monthly income.

Example: Monthly Expenses on Credit Report - $1,600 Gross Monthly Income - $3,000 $1,600 / $3,000 = .53 or 53% Debt to Income Ratio This person would not qualify. c] Active Checking Account – The ONLY way to collect monthly payments from your tenant/buyer is by check, whether it be a personal check, bank check, certified check GET A CHECK, period! DO NOT EVER ACCEPT CASH PAYMENTS You can’t track cash and the name of the game when renting to own properties is creating a documented paper trail. Collecting rents by check allows you to create a paper trail of on time rental payments which will come in handy when it comes time to get a mortgage for your tenant / buyer. Having 24 months of on time rent payments, verified with cancelled checks goes a long way with a lender and may be the sole reason your tenant/buyer is approved for a mortgage to buy your home. d] Cash Reserves – You want to make sure they have enough money to satisfy your non refundable option deposit requirements. In addition to them being responsible for paying the non refundable option deposit they must have adequate money for any rent or pro rated rent that will be due, any utility deposits required and general moving expenses. In most case your tenant / buyer will be giving most, if not all of their savings to you. e] Credit History – All prospective tenant/buyers will have credit issues, that’s why they are renting to own and not buying. It is your job to find the ones that have a chance of eventually cleaning up their credit and obtaining a mortgage to buy your house. We suggest you not consider anyone who owes more than $10,000 in collections. Why? Well for the most part all collections will have to be paid off prior to them obtaining a mortgage. Knowing this, you want to make sure that it is realistic they be able to accomplish this. Also, we do not suggest approving people who have collection accounts with past landlords or management companies. If they didn’t pay their last landlord, what makes you any different? We also do not like to see more than $1,500 in back child

support. If they don’t care enough about their own flesh and blood, they surely won’t care about you! Why would you use the Rent to Own technique? In most cases you will use the Rent to Own strategy as an alternative to either renting your property or retailing your property. Some of the reasons you would use the rent to own technique are: a] Property may be located in an area that does not completely lend itself to an outright sale. Possibly an area where 50% of people are tenants and other 50% are owners. When you have the Rent to Own technique as part of your real estate arsenal you now have the ability to buy in tenant occupied areas and still realize the same profits you would in owner occupied areas. Having this broad of a market to buy in greatly increases your chances of buying at greatly reduced prices on a more consistent basis. b] Property was listed for retail sale but for whatever reason is not selling. c] Mortgage market has tightened up lending criteria making it more difficult for low to moderate income buyers to qualify for a mortgage d] To avoid the expense of current income tax bracket creep. e] To simply diversify your real estate strategy / portfolio. It’s all about “Multiple Streams of Income” in this business. The more streams the better. A perfect mix is accomplished by utilizing the Buy Fix and Sell technique, Buy and Hold technique and the Rent to Own technique at different times throughout the course of the year. F] To maximize your profits. When using the rent to own strategy you can usually command a premium sale price. Plus you will not be paying any real estate agent commissions. Benefits of Selling Your Properties Using the Rent to Own Technique Non Refundable Option Deposits – This deposit is the fee you charge to give your tenant/buyer the option of purchasing the property from you at a later date for a pre-determined price. The deposit should be priced at between 2-5% of the final sale price. This deposit should only be credited to your buyer if they decide to exercise their option to buy the property from you.

Premium Rent – When using this technique you will also have the ability to charge a slightly higher than market rent, but don’t get carried away with this. In most cases when investors charge a higher than market rent, they use the mark up as a “rent credit” given to their tenant/buyer. For instance an investor who is looking for $650 a month may charge $750 a month on a rent to own property but give the tenant/buyer $100 a month rent credit towards the purchase price. We DO NOT suggest doing this in Pennsylvania as it has caused many situations where the courts, should an eviction take place, view this rent credit as the tenant/buyer having “equitable interest” in the property and therefore creating a foreclosure situation and not an eviction. You want to avoid this at all costs so do not ever give a rent credit to your tenant/buyers. That said, when offering your property on a rent to own arrangement you can usually get away with charging up to 5% higher than what current market rent is. How do you determine what true market rent is? Simple. It is the average of what all other property owners are getting for comparable properties. You can very easily find out what market rents are in a given area by watching the classifieds for a few weeks and then calling the owners of those properties to find out specifics. Take the average of say, 10 properties, similar to yours and within close proximity and that’s what market rent is! Premium Sale Price – The philosophy behind this is exactly the same as the “Buy Here, Pay Here” car lots. If you have cash, drive away today for $10,000, but hey, we can finance it for you for $292 every two weeks no matter what your credit. The person who opted for the financing paid $14,000 for the same car you and I with our own financing or cash could have bought for $10,000, and renting to own properties is exactly the same. Flexible terms = premium price. Remember you are positioning your property to sell in 24 months or so and it is reasonable to expect your tenant / buyer to pay you what the house will be worth at that time, taking into consideration appreciation that may occur during the option period. Tenants Mentality – In most cases the people you will lease to on a rent to own agreement have more of an owners mentality as opposed to a short term, “in and out in a year” tenant mentality. Also, they gave you a large non refundable down payment on the house therefore making it more important to them that they pay on time and maintain the property because they have more to lose than just a security deposit.

Tenant Improvements – We have had several tenant/buyers over the years finish basements, repaint, replace furnaces, install new kitchens and baths and even add marble flooring in their homes that they are renting to own from us. Ability to Do It All Over Again If It Doesn’t Work the 1st Time! If, for whatever reason your first tenant / buyer does not exercise their option to buy you as the owner have the ability to do it all over again, but At this time for a higher price all around. Downsides of Using the Rent to Own Technique Percentage of Closed Deals – It is important to know up front that only a portion of the people you put into a rent to own agreement will actually buy the property from you. In our experience about 35% of tenant/buyers actually end up purchasing the property they are in. Your closing percentage can be increased with proper screening up front. Also, your relationship and rapport with your tenant goes a long way. Late Payments – Late payments are always an issue you need to take into consideration. Plan for them to happen and be prepared to deal with it. Don’t wait until it happens to try to figure out what to do. Set rules and guidelines and create a system to manage your rent to owns and stick to them no matter what. Evictions – Where you have late payments you will have evictions. Once again, set up a system for your rent to own properties and work your system on every one of them. Damaged Houses – When and if you deal with an eviction you run the risk of the tenant/buyer damaging your home. If this happens have a repair plan in place and act quickly. Once the property is repaired you can immediately set it up on a rent to own arrangement with another tenant/buyer but this time for a larger non refundable option deposit, a higher monthly rent and a higher sale price. The Rent to Own technique is a great way to generate positive cash flow and huge cash profits. At bare minimum consider using this strategy in conjunction with others. I truly hope this information will help you become a better, more successful and profitable real estate investor. 25

Part 11 Rehabbing 101 Rehabbing will MAKE or BREAK a deal, period! Not only have I seen people lose their shirt during the renovation phase but I myself have lost my shirt, pants, underwear, socks and shoes! If I wore a watch I’d probably have lost that as well. Rehabbing is ttttttttough! While you will surely make mistakes, sorry I am not usually this negative but I feel this is fact, I am going to try to give you a basic understanding of what you should be doing to safeguard yourself against potential pitfalls when it comes to rehabbing houses. Contractors – Half of the battle is won by finding the right contractor. When you are first getting started as a real estate investor you will run into SO MANY contractors who want to work with you and they all are the best in the business, according to them. Before you select one make sure you: Talk to a few people who have worked with them in the past. Try to visit a project they are working on or just finished up. Get a copy of their business license and insurance. You will also need copies of their drivers license and social security card. Without these you do not work with this person, end of story. Meet their staff and ask what each persons specialty is. Have them bid out a project in sections allowing you to see what they are charging for certain items such as heating units, drywall, flooring, electrical, roofing etc. Scope of Work and Independent Contractor Agreement – If half of the battle is won by selecting the right contractor then the other half is won by thoroughly documenting everything up front in the form of a detailed Scope of Work and Independent Contractor Agreement. Your Scope of Work should be as detailed as possible. See example on next page:

Scope Of Work Address: 123 Zack Rules Street Rehab Standards: Rent to Own Harrisburg, PA Exterior: ‐ Replace the front and rear exterior doors ‐ Install new mailbox, black ‐ Replace the front and rear porch light fixtures, ceiling mount, black ‐ Replace all damaged wood on rear porch and porch roof ‐ Scrape and paint all wood surfaces white ‐ Install railing to the front porch, black ‐ Inspect roof for possible leak from installation ‐ Remove vent cover from above side window and repair structure Interior: Interior Notes ‐ All wall paint to be Bear Gobi Dessert Flat All trim paint to be Bear Semi Gloss Bright White All ceiling to be Bear Ceiling White All carpet to be light tan, builders grade plush Padding to be 6 lb. ‐ Living Room o Install drywall to all walls and ceiling o Install ceiling light/fan o Paint and patch o New carpet and padding ‐ Dining Room o Drywall ceiling and walls o Install ceiling light/fan o Paint and patch o New carpet and padding ‐ Kitchen – keep existing layout o Drywall ceiling o New counter top, sink, faucet, cabinets. o Flush mount ceiling light fixture to match faucet o New sheet vinyl flooring o Paint and patch 27

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Full 2nd Floor Bathroom – keep existing layout o New tub, vanity, sink, faucet, toilet o New sheet vinyl flooring o Medicine cabinet o Light fixture and ventilation to match faucet o Paint and patch

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Bedroom (2nd Floor Front) o Install drywall ceiling o Patch and paint o Carpet o Flush mount light fixture

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Bedroom (2nd Floor Middle) o Paint and patch o Carpet o Flush mount light fixture o Install drywall to all walls

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Bedroom (2nd Floor Rear) o Install drywall ceiling and walls o Paint and patch o Flush mount light fixture o Carpet

Mechanicals: ‐ Upgrade electrical service and panel box to 100 amp The above is an example of an acceptable scope of work. You’ll notice we identified type of paint, type of flooring and broke the rehab down into a room by room Scope of Work. Using this formula there is no question as to what you have in mind. It is absolutely imperative that you put in the time up front to determine what it is you want done to the house. Once complete create a detailed scope of work and then walk the contractor through with that scope, room by room and describe your vision to him. Doing this will greatly reduce the chance of “Oh I didn’t know you wanted that” type of garbage excuse by the contractor. Once you have your detailed scope of work complete, now all that is left to do, before the fun begins, is to prepare an Independent Contractor Agreement. These are different for every area so please, consult an attorney and if you plan to do any serious business, have a customized agreement drafted protecting you in case of breech of contract. The lesson here is you will NEVER enter into a rehab project with ANYONE [including your family and best friends] without having it in writing and laid out in an easy to read and understand contract protecting you. 28

If you have done the above, congratulations, because you will be ahead of about 90% of the people who get into this business. Now the fun begins. Look, managing a rehab project is no fun but it is mandatory if you plan to be in this business. Here is the process in which your rehab should evolve: Demo / Hauling Structure / Roof / Siding / Windows / Gutter – Downspouts / Ext Painting Electrical / Plumbing / HVAC Framing / Drywall / Painting Kitchen and Bath Install Finish Items / Trim / Punch List Flooring / Carpet / Vinyl / Tile / Hardwood / Laminate / Other Cleaning / Landscaping In closing this lesson out I need to say that rehabbing properties is not rocket science. Rocket science is easy! No really, rehabbing properties is doable. Here are the things that are in my opinion absolutely mandatory to succeed. Make sure proper permits are pulled by not only your contractor but any of his sub’s such as electricians and plumbers. Visit your project at least once per week preferably during work hours. Talk to the contractor at least twice a week to stay in tune with how the project is evolving. Do not give a draw that is not deserved, period! I don’t care what the contractor says, including he is walking off the job. It is better to have your money in hand and have a contractor walk off the job then it is to pay out money that was not deserved and have the contractor get ahead of you. Once they get ahead of you it’s over. Document all change orders in writing. Do not pay the final draw until you have performed a thorough walk through checking all items are working properly and that the property is truly finished. This means flush toilets, turn on heating systems, check receptacles, run water, open and shut windows and doors etc. 29

If you just follow some simply rules rehabbing properties can be fun, kind of. Until then stay positive in all you do and donâ&#x20AC;&#x2122;t believe a word your contractor says.

Part 12 Bare Minimum Recommended Reading Real Estate Buy and Hold by Schumacher Buy It, Fix It, Sell It by Myers Flipping Properties by Bronchik Business The E-Myth by Gerber The 4 Hour Workweek by Ferris Rich Dad Poor Dad by Kiyosaki Self Help Think and Grow Rick by Hill The Secret by Byrne How to Win Friends and Influence People by Carnegie

Part 13 Putting all the pieces together to become a successful real estate investor. I hope you’ll agree I have given you some vedy vedy good information in this Investing Success Series. I wrote it, then rewrote it, then rewrote the re-write and recently [04/01/2010] re-wrote the 2nd re-write. Thank god this damn thing is over because I’m exhausted. A good friend of mine tells a story about Mark Twain where he submitted a 2,000 word essay but remarked “If I had more time I would have submitted a 500 word essay”. That is hopefully what I accomplished here. I could have easily wrote another 200 pages but you would have never read it. The goal of this Series was to keep it short and sweet and meaningful. So if you are ready to begin to put some of this information into practice and would like to work with me and my company then here is what you need to do. And just let me say if you actually got this far and read this entire Series then you are exactly the type of person I want to work with. I don’t think I told you earlier but when the Carlton Sheets course arrived back in 1999 I completed the entire thing in like 40 hours! I was on fire, still am! Here’s what you should do if you want to start making money in real estate investing. Step 1 -

Become a client of ours, right now. It’s free to do so and there is no obligation to do anything. You can become a client of ours by going to www.padeals.com.

Step Two -

Once you are an approved client of ours you will attend a free, private, one on one consultation with us. Here, we will determine exactly what type of investing is best for you and customize a plan to get you started within 3-4 weeks.

Step Three -

You will then scour our website until you find the perfect deal. We offer a lot of properties every month and I guarantee you will find one that fits your investment strategy perfectly. Plus if you don’t, we will find one that does, I promise!

Step Four -

Next we’ll go to closing. After closing we’ll put a plan in place to begin the rehab. Once the rehab is started we’ll help you monitor the progress. Once the rehab is complete we’ll implement marketing that compliments your exit strategy.

Step Five -

Finally you’ll either rent, rent to own or flip your property and make preparations to complete your second deal.

Are you ready to take action?

Let me make one really honest point right here and now because if you are anything like me you are probably wondering how much all of this costs. It’s got to be super expensive right? Well there is actually no fee whatsoever to become a client of ours because we make our money when you buy a property from us. For instance if we bought 3111 Brisban St for $20,000 we would be offering that property to you for slightly higher than that, therefore creating a profit for ourselves, and that’s how we can get away with not charging any up front fees. I feel I’ve just given you the knowledge to succeed as a real estate investor. Maybe you can’t go out and do a dozen deals tomorrow but you at least have a pretty solid foundation. It’s now up to you to TAKE ACTION. See, knowledge is NOT power although many people will have you believe that. Knowledge, combined with action, massive action is power. Do you want to take action towards your real estate investing goals? If so, then go to our website at www.padeals.com. I guarantee you if I was able to succeed in this business you can too, no doubt in my mind. I hope to talk to you soon and better yet, I hope to be receiving your testimonial. Much success to you and yours. Sincerely, Zack Wiest President of PADeals P.S. If you don’t become a client of mine you owe me $97for this material. When you downloaded it I was able to secretly capture all of your personal information. Sorry. You have 48 hours to become a client of mine or your AMEX is mine! I am totalllly joking. I do not have any of your personal information, swear to god! P.P.S. Change your life, become a client of PA Deals today. Get pre approved right now www.padeals.com

About the Author Zack Wiest As I write this in mid 2010 I’m a very successful real estate investor and business owner. It was not always this way. This is my story. I was born in Harrisburg, PA in 1976. We lived with my grandmother until I was seven, at which point we moved out of the city and into a ranch home in Susquehanna Township. Unfortunately, only a few short years later I began to run with the wrong crowd. I say the wrong crowd, which it was, but don’t get me wrong I made all of my own decisions, nobody put a gun to my head. Anyhow, the combination of some seriously bad decisions, coupled with running with the wrong crowd led me to a very dissapointing early adulthood. As a result, I worked some really bad jobs including dishwashing, door to door selling [I sucked at this], telemarketing and finally bill collecting. While being a bill collector is a blow to the ego it did provide me with a fairly decent salary, one in which I could begin to save money.I had tried opening several small businesses with no success. I also bought into and tried my best to succeed in several multi level marketing companies, but failed miserably at those as well. In 1999, being really fed up with life I made a promise to myself that I was going to make something of myself, no matter what. I had read Think and Grow Rich by Napoleon Hill dozens of times and I began to believe that “What I could conceive and believe, I could achieve”. I saw an infomercial one night that I had seen many times and decided to order what they were selling. It was the “No Money Down” real estate investing course offered by Carlton Sheets. This course set things in motion I would never have dreamed. From 1999 – 2002 I actually quit my job as a bill collector and completed over 150 deals! In 2003 it all blew up. I had grown too fast and lost control of it. My business failed in the 2nd quarter of 2003. I even lost two homes to foreclosure. It was tough going from nothing to something back to nothing in 3 short years. Actually I ended up with less than what I started with, even after 150 deals. Go figure! In late 2003 I made a conscious decision to fight my hardest to get back what I had lost. Hell, I now knew what not to do at this point because I had made all the mistakes already. I began the

rebuilding process shortly thereafter and by April 2004 I was back in business, full time. I was killing it! I did over 200 deals from 2004 – 2006. In 2006 I decided now was the time to branch off on my own [I had a partner from 2004 – 2006] and create a company that would dominate the Central PA real estate market, and that’s exactly what I did. I formed a new company and that company quickly became the absolute industry leader in Central PA. We were revolutionizing the way wholesaling was done. I look at what the guru’s are teaching nowadays with squeeze pages, opt in boxes, product launches, full service wholesaling and more and I have to tell you, I was doing all of it in 2006! From 2006 to present we have become and remained the most successful residential real estate investing firm in Central PA, maybe all of the state. We have successfully bought and sold over 400 properties since inception and we are averaging 110 deals per year, consistently for the last 3 years. We don’t guarantee that everyone we sell a property to will succeed, but we do guarantee that we will be there for them every step of the way, even when things go wrong. Due to my successes as a real estate investor I am currently living an awesome life, one I fantasized about just a few years ago. I live in my dream home with my phenomenal wife and two beautiful daughters. I employ my friends and family and we all make money together. In May of 2009 I had the pleasure of donating $12,500 to LOVESHIP, a non-profit housing agency based in Harrisburg, PA. I also regularly contribute to C.R.AM., a non-profit that helps exoffenders re-enter society with a meaningful purpose in life. I was just recently invited to sit on the board of directors of C.R.A.M. which I gladly accepted. I encourage you to take the information provided over these pages and put this information into action. I wish you success in all you do and hope to meet you soon. Take care and best wishes. Sincerely, Zack Wiest www.padeals.com