Wealth Amplifier Step 2: Rehabbing for Enormous Profits

Wealth Amplifier

Step 2: Rehabbing for Enormous Profits

Gunnar Dylenn

Smashwords Edition

Copyright 2009 Gunnar Dylenn

Smashwords Edition License Notes

This ebook is licensed for your personal enjoyment only. This ebook may not be re-sold or given away to other people. If you would like to share this book with another person, please purchase an additional copy for each recipient. If you're reading this book and did not purchase it, or it was not purchased for your use only, then please return to Smashwords.com and purchase your own copy. Thank you for respecting the hard work of this author.

Disclaimer of Liabilities

It is the belief of the author that the principle person responsible for your personal finance is you. Although the author tries to bring accurate information, under no circumstances can or does the author warrant the completeness or accurateness of the content found in this course or its usefulness for any particular purpose. Therefore, the author makes absolutely no promises or warranties, nor accepts responsibility for any liabilities, injuries or damages that you may cause or incur when using methods, principles or other information provided within this course. The author strongly encourages the user to research all information provided within this course. None of the methods, principles, or other information provided to the user is meant to be used in replacement of professional advice. It is solely up to the user to determine if the methods, principles, and other information are safe and suitable for their particular situation.

Reproduction of any part or translation of any part of this course without the expressed written permission of the copyright owner is unlawful and will be prosecuted to the fullest extent of the law.

Copyright 2009 All Rights Reserved

Dedication

This course is dedicated to people, who know that life is about taking calculated risk; taking what’s in your imagination and making it come alive, and brave enough to change themselves to become the change they wanted to see in this world.

To Mike Hegstrand thanks for showing the world that one of the toughest, and roughest persons on this rotten stinking planet can have the strength and the wisdom to change and wasn’t afraid to show the world that change.

To Drema thanks for jumping though all my mental barriers, staying interested in getting to knowing me to my core, for being my true friend and being a great person as well !

A life-size thank you to everyone who has helped me out along life’s journey, I will never forget any of you and you shall live in my heart forever.

To every musician, thanks for giving the world your beautiful gift to enjoy.

Table of Contents

Chapter 1: How to Start

Chapter 2: Evaluation

Chapter 3: Where to Find Distressed Properties

Chapter 4: Neighborhoods to Avoid

Chapter 5: Neighborhood Goldmines

Chapter 6: Financing Rehabs

Chapter 7: Wealth Amplifier

Chapter 8: Where to Find Repair Money

Chapter 9: Repairs that Pay

Chapter 10: Controlling Contractors and Subcontractors

Chapter 11: How to Advertise and Sell a Property

Chapter 12: How to Defer Taxes and Capital Gains

Chapter 13: Motivation

Appendix: Chapter Quiz Answers

Chapter 1: How to Start

A journey of a thousand miles begins with a single step.

Lao-Tzu

Back to top

In my mind, no course would be complete with out telling you what items you will need to purchase and what kind of research or what kind of classes you will need to take to be successful. Before we get into that there are a few questions that you should ask your self. Now is the time to be completely honest with your self. Why is it that you want to be someone who rehabs small apartment buildings? So, you can be successful and make tons of money right? By definition this is a highly stressful and risky environment that is constantly changing. Each project will challenge you in its own way. Here are some of the traits and characteristics that will allow someone to become a good real estate rehabber. Do you thrive on having responsibilities? Do you like the idea of being the quarterback of the team? Do you like being able to call all the shots? Are you the kind of person who has the ability to influence other people’s actions? Do you have the drive to stay focused and the ability to see the overall picture when everyone else is side tracked on details? Do you perform better under stress or when there is pressure on you? Are you the kind of person who stresses out when deadlines are not met? Do you like the idea of taking something that’s raw and forming it into something of beauty and of value? Do you like to imagine something then work to make it a reality? Do you have a high energy level? Do you have the will to be successful?

Many of you may be surprised or shocked after reading the above paragraph. Rarely if ever do you purchase a course that asks you, is this really what you want to do? I just felt that those were some of the basic questions you should ask yourself. Once you’ve committed yourself there are many items you must purchase, other forms of education you must have, and you must get accounts set up at different businesses before you start buying your properties.

Business Mailbox

What you should obtain is a business mailbox. This is similar to a PO Box but has a street address on it. These can be found at most private mail stores. You should rent this mailbox in the better area of your town. This will give your business a street address. This is also the address that you put on your business cards. People will not know when you give them your business card that this is a mail box. This is where all your business related materials should be mailed to. This will also create a barrier between your business, your tenants and your family.

Business Phone Line

You will also need to get a business phone line put in your house or have a cell phone that is used primarily for business use only. This should also include a way to check your messages while you are away from your house. This is where you should receive your business calls. Area codes now have a stigma attached to them so choose the best area in your town. This will also create another barrier between your family, and your business dealings.

Fax Machine

In today’s world you need to have all the modern communication devices that are available. The main piece of communication that you need in today’s world is a fax machine. In your business dealings information is the greatest commodity available. Many times speed is a deal maker or can be a deal breaker. When you are interested in a property it will save you time and money by not having to drive somewhere to pick up some information about the property and time can be money. Fax machines are a wonderful thing to have so you can give or receive any information in less than a minute. The cost of a good fax machine is minimal at best. Make sure you have a fax machine this just makes sense.

Bank Accounts

The next items that you will need to get are bank accounts. You should have a minimum of three bank accounts. One account for your pay yourself first money, one account for personal bills, and one account to keep track of the properties that you are rehabbing. By doing this it will allow you to keep track of all your expenditures and your receipts. This will also save you time and will provide you with great documentation when tax season arrives.

Budget

If you asked a large amount of people what their monthly cash flow is most people would not be able to answer that question. Most people do not have a budget. That’s why they cannot answer that question. How are you suppose to live with in your means or get a head if you don’t know how much money you have coming in or going out each month? This really amazes me. You should make yourself a budget and stick to it. You should also meet with your spouse, or your life partner, or by yourself at least two times a week and review your budget. Try to cut as much unnecessary spending out of your budget as you can.

Appearance Matters

Real estate is about perception and perception is perceived power. You should try to create the strongest and most powerful image that you can. Your appearance says a lot about how you feel towards yourself and the lifestyle that you live. Also try to dress the part. I once heard someone say that to play the part you must look the part and I believe that to a large degree. Buy yourself some business clothes and shoes. Always wear suits or business casual when you are making any deals in real estate. Men keep your hair short and neat. Men if you choose to have facial hair keep if neat and trimmed. Also if you have facial hair and it has many colors in it die it one color. Women keep your hair pulled back and out of your face. If you have an older car keep it cleaned, washed, and waxed. This will ensure that you will look as professional as you can. This will also allow you to project the most powerful image that you are capable of producing.

Banks and Lending Institutions

You should realize that the bank and other lending institutions are a significant partner in you being a successful rehabber. You should seek out two or three banks or lending institutions and meet with the small business loans person and explain to them that you would like to start rehabbing small apartment buildings. See how much money they will loan you. Find out what their interest rates and payback periods are. How much collateral will they need? Don’t be alarmed at first if they want a lot of collateral from you. Over time and once you do a few deals they will ease up on you and give you much more credit at a cheaper cost. They may provide the mortgage money, they may also provide the repair money, and they may even provide you with the property that needs rehabbing. Wow, what a perfect partner to have! Money is very crucial in rehabbing a property and the old adage time is money and money is time is also very true. The longer the process of rehabbing the property takes the more payments you will have to make on your accounts and on the mortgage. That also results in less money being made by you. You want to stay current on all your accounts so when you do another rehab, your creditors will still want to do business with you.

Supply Accounts

Anytime you start rehabbing property, you are going to need the raw material to complete the job. It is wise to go to the vendor stores and try to establish accounts with large credit lines. This will help reduce the amount of capital needed up front. This also allows you to make small monthly payments instead of paying for everything at once. Some of the vendors that you may want to set up in advance are warehouse stores, plumbing stores, landscaping, and carpeting stores. Having this shell set up before you buy your distressed property will save you time and energy when you get your rehabbing going. This will also help you determine the amount of capital you have to work with. Periodically, perhaps every 6-9 months assuming you’ve made your payments on time you should ask for credit extensions. It never hurts to have a lot of credit at your disposal. This is also a great place to find people who work in the area your interested in. These shops will have business cards and usually know who is reliable and who does the best work.

Real Estate Brokers or Agents

I strongly recommend that you become a real estate broker in your state. Jump through what ever hoops the state requires from you to receive a license. This way you can make a commission on the buying and selling part of the transaction. This could make a big difference in the money that you make at the front end of the deal or it could help with the repair cost. It will also help you save money at the back end of the deal when you go to sell your newly refurbished property.

If you don’t get your brokers license then you will probably need to use a broker or agent in the real estate industry to help you find, buy, and sell your rehabbed properties. You will want to deal with a real estate broker or agent that deals specifically with apartment buildings. You also should get as many brokers and agents on the lookout for apartment deals for you as you can. This will amplify your eyes and ears in the market place. The motivation of your real estate professional is essential in your being successful so treat these people well in return for there services.

Lawyers

Lawyers are the butt of many jokes; however, in today’s rich environment of litigation not having a lawyer is simply a bigger joke. A good lawyer will protect your interest and ensure your rights are enforced. A good lawyer will help you make a decision and help you avoid massive potholes. I would recommend you find a good real estate attorney and keep them on retainer. You can find a good real estate lawyer at apartment associations, investment clubs, and real state classes along with referrals from college professors. They can help you set up partnerships, oversee real estate contracts and should be a must on your list of goals to get.

Accountants

Accountants are a must when you are rehabbing small apartment buildings. They will help you receive all the tax breaks and write offs that you are entitled to. Having a good tax accountant will enable you to make the most of your investment dollars spent and will help you avoid capital gains. This will be discussed in further detail in the How to Defer Taxes and Capital Gains chapter.

IRS

The internal revenue service is the government agency that is responsible for collecting taxes. It is the most feared and hated agency in the whole United States Government. You should read the internal revenue tax code that deals with repairs of investment property, capital improvements, capital gains and real estate dealers. By becoming more educated in reading the tax code you will lose a lot of the fear that you have when preparing your taxes. You will furthermore have a much better idea of questions to ask your accountant. This will also be discussed and you will learn a great deal more in the How to Defer Taxes and Capital Gains chapter.

Classes

There are a magnitude of classes you should enroll in to better educate yourself and to get hands on experience in the business you’re about to enter. This doesn’t mean you are going to do all the repairs yourself but you should know the scope of the work that is going to be done. You will also learn the time frame that any job is going to take. By doing this your confidence will grow tremendously when looking at any repair job.

Contractor License Classes

To obtain a contractors license in most states a person is required to have so many classroom hours before they are allowed to take the test required to get a contractor’s license. This could be a wonderful place to learn about home construction, permits and building codes. Courses like this may be a little costly in terms of money, time, and effort, but will be well worth the money, time, and effort when you start rehabbing properties. Again you do not have to obtain a contractors license but the knowledge you’ll receive will further your advantage in controlling your contractors. This is also a good place to do some networking with people who want to get into this line of work for jobs in the future and to get referrals.

Home Inspection Classes

A home inspector inspects properties, evaluates home heating, air conditioners, electrical wiring, and plumbing systems, and then writes reports based on their findings. In most states home inspectors are required to get so many hours of classroom and hands on experience to become a licensed home inspector. This is another great class that you should take. This class will teach you about potential problems with properties. If the class won’t work for you then maybe you can find a knowledgeable home inspector