QUOTE (Phantomtib @ Feb 7 2008, 06:02 PM)
This is what I found.....
Hey Y'all
Remember back in August they were advertising a free seminar about real estate investing put on by rich dad poor dad?
Well I went to the free seminar they put on at the Deerfoot Casino conference room. It was mostly a bunch of gobbledeegook for people who have ZERO background with Rich Dad Poor dad or Real estate or investing period, but the speaker did pique my interest when he started going into to Zero Down purchasing, flipping, wholesaling, asset protection etc..
So like the brainwashed sheep I am I paid the 500 dollars to go to the real 3 day course which for me started today. I am just going to put up my review of the material covered and comments for those who may have been thiking of doing the same - This might save you a couple hundred bux, or maybe you'll want to do the same
I'm trying to make this as unbiased as possible. Just so you know I have a little bit of background in investment real estate, but I'd only say i know more then the average person on the street, I am by no means a professional at this and thats why I am taking the course.
The basic set up of the course is one guy "Marc Gatineau????" does all the speaking but there are these 'advisors' that kind of hang out in the back and answer questions for Marc because hes a dick and absolutely will not talk to you no matter what unless hes soliciting audience participation.
The room is split into many 6 person tables and you end up moving to a new table every 2-3 hours and meeting new people which was kind of fun.
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Day 1:
Radisson Conference Center on 16th Ave NE
Start @ 9:00 am
- Spend a solid hour introducing the staff and on gobbledeegook and story telling.
- Start reviewing the ESBI square that Kyosaki is always talking about and then we worked in groups or 5-6 people per table writing our comments etc and then one person would get up to the mike and tell everyone what our table had come up with. We did for each of the square and then a whole bunch of other random things too(great filler). Nothing real estate specific was mentioned until about around 11:00am
- Then he started talking about the 6 essential parts of real estate investing for about 3.5 minutes while I was in the bathroom peeing:
1.) Asset Protection/tax structure
2.) Money making money and discount notes?
3.) 'Big hits' - Flipping, assignments etc..
4.) Asset appreciation
5.) Cash flow and Buy / Hold
6. ) 2 year education program??? have no idea what this was all about
Then for the last 45 minutes before lunch we talked about credit cards and how to get more credit by calling you card company and following a script. Talked about the importance to having access to low interest cash on demand etc...
12:00-1:30 Lunch
After lunch we went back into the CC thing and people who called the CC companies over lunch shared their stories of how they were able to transfer balances and get 6 month 2.9% financing etc...
We also had a discussion on how lines of credit are BAD and CCs are GOOD:
CCs only require a minimum payment each month
LOCs require a minimum of 3% of the utilized credit each month
When applying for a loan at the bank the bank will assume a min 3% payment on your whole LOC as if it were maxed out, but will only assume the minimum payments of your CCs at that time
^^^ now regarding this, my bank used my total credit on my LOCs AND my CCs and figured a minimum 3% payment. D.Dub if you are reading this - Do you do the same? I cant remember, anyways the speaker said that only banks do that and that Mortgage Brokers do not. Not sure if this is truth or fiction.
Oh yeah the speaker also threw this little gem out at the start of the morning (im paraphrasing here)
"Calgary has the highest rates of foreclosures in all of Canada right now... People are buying houses way beyond their means"
Just a couple months ago they were saying on the radio here that Firms that specialize in Bankruptcies and foreclosures are going BANKRUPT in Calgary... So naturally I aksed him about this and he couldnt source it, like a few other interesting things he said but ah who cares, I was having fun learning the 'CONTEXT' of investing...
OK so around 2:30 we moved on to the 11 steps to buying real estate:
1.)Locating Properties
2.) Analyze cashflow
3.) Create an exit strategy
4.) Determin appropriate financing
5.) Calculate cost of purchase and sale if youre flipping
6.) Prepare a contract
7.) Negotiate with the seller
8.) Do your due dilligence on the property
9.) Actually visit the property and renegotiate if necessary
10) Satisfy the contingencies you built into your contract
11.) Close
Then he spenta litlte bit of time on basic cash flow for an income property IE what gross rent and net operating income are etc.. etc..
Then we talked about the good ol Gross Rent Multiplier .007 and how to quickly analyze a property for cashflow and determine an initial offering price
He also talked about getting Seller or Vendor financing and spent a little time explaining that whole concept, and how to deal with the vendors and real estate agents etc.
Then there was a bunch more fluff and filler with people getting up and discussing their ideas about crap on the mike from each table... I don't remember what this was about because I was reading a the newspaper.
Then around 5:00pm we busted out teh Cashflow 101 ame that they try to sell you in all of kyosakis books. I actually own this game and I think its pretty fun - But I was the only person in the joint who knew how to play it. We played for an hour and a half??? Seemed more like 35 minutes and I think i rolled the dice maybe 5 times... Then we all had a big discussion and people got up and talked about their 'FEELINGS' towards the game... gawd
then in the last 45 minute the speaker decides to break from the program and squeeze the section on Corporate structure and asset protection in before the end of the day... This was one of the main reasons I paid for this course so i was pissed that he rushed it, but what are you gonna do
I got the idea....
You start holding company
Buy shares of holding company and name yourself director
You give money to company as shareholder loan
Holding company then starts a Real Estate Company and a consulting company
Real Estate company buys the House, and get some of the money from the holding company (which actually is a shareholder loan of your own money) The holding company writes a paper mortgage against the house and then the real estate company effectively owns the house, but has little or no equity because it owes everything to the bank and to the holding company.
Assuming your house investment is actually flowing cash and you're making money, you deduct all operating expenses related to the actual house and then whatever is left will be profit for the Real estate Company.
Now Because someone had to go out and find the deal and take care of the closing and contracts etc... (ie your CONSULTING company) you now hand a bill to your Real Estate company from your Consulting company for the remainder of profit left over. If you keep it int he RE company it will bet taxed at 30+% because real estate isnt considered an active business. However real estate consulting is providing a service and is therefor considered an ctive service and the money brought into the consulting company is only taxed at 17% or so.
So now you have effectively removed ALL of the equity and cashflow from the company that owns your house which you are the director of, but you dont own, your holding company owns it.
Now you can save some more money in taxes by deducting office suplies, office space etc from the Consulting companies profit furhter reducing the amount of money that will be taxed at 17%.
Now heres where it gets good
You can apparently send a PERSONAL invoice from yourself to your consulting company (which is owned by the holding company) and you can bill mileage and percentages of your house etc for office space 'USAGE' and further reduce the amount of money that will be taxed.
So once all of this has been done, the money the consulting corporation has been taxed fairly and legally and cant be taxed again. This is when you transfer it to the Holding company. From the holding company you can withdraw up to 32,000 per year per shareholder as a non taxed dividend. Thus completing the circle of asset protection and tax evasion, i mean minimization for the purpose of maximizing profits
So that ws that for the learning bit
Then the speaker took a solid 10 minutes to tell us a "True real life personal story" about his father who never invested and promised his mom a vacation once a year when they retired and is now senile and depressed and suicidal because he is broke and cannot even afford gas to drive anywhere in their car. Then he said that he truly cares about us all and wants everyone to avoid this, and that the best way to do it is by taking 'Advanced Learning' and finding a Mentor.
Now Rich Dad Education offers a mentoring program and Advanced Learning courses that all start around 5000 bucks a pop... I had a hard time believing he was actually concerned about us stupid 'newbies'
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Day 2:
Class started at 9:00 but I felt like I needed a larger cahier to write my notes in so I waited until 9 to go to Office Depot
9:00amOK So the morning discussion started off with everyone sharing their stories about what they learned from their Credit Bureau reports.
I used to have a 758.... Now I don't, and that made me very very sad.
Then for the next hour we discussed Bankruptcy and how banks and credit companies treat thing differently etc. I found it to be somewhat educational. We talked about the differences between Consumer Proposals and actual Bankruptcies etc...
Then there was another ghey discussion on how E&Ss think about credit Vs B&Is
10:30am Switch Tables (12 min break)
CONTRACTS
So we talked about real estate contracts. I really enjoyed this part. We talked about specific adendums and Clauses that you can use to tie up a property while you take all the time you need to do thurough Due Dilligence and also escape clauses so that if things aren't exactly what you want you can get out of teh deal
The main idea here was that you never go and look at a property until your offer has been accepted. Why waste all that time on properties that the seller isn't going to sell to you? Send out 100 offers and maybe 3 are accepted. And then you move from there
Don't tie up your money by making deposits on properties that you haven't done your DD on yet. And if teh buyer still insists write in a clause that the deposit is only cashable on closing so you essentially are only writing a check and don't have to wrangle with the RE agent to get your money back.
Specific clauses in the offer would be some of the following :
- Vendor agrees to carry a mortgage (important not to word this as 'second mortgaage') ^^ You'll need this for sure for no money down purchases
- Subject to inspection of property within X many banking days of acceptance of offer
- Purchaser has the right to assign this contract to any future purchaser, corporation or entity at the sole and absolute discretion of the purchaser etc..
- Purchaser has the right to show this property on 24 hours notice to any peson, corpoartion entitiy etc...
- Upon acceptance of this offer, Vendor agrees to provide a list of 5 or so common documents like: Rent Roll, Land Survey, Utilities, ETc... Then the important part for later .... 'And any other document the purchaser may require'
Make the closing date XXX many number of days AFTER you have completed your Due dilligence to your absolute discretion. So if you find something out about the property (ie could be environmental problems) you can get the seller to pay for the study because they have agreed to provide this int he contract they signed, and also the longer they delay the longer you have to close because its worded so that you wont close until 45 days AFTER you've completed all your DD. So you have effectively tied up this property and can place a lien against it if you so choose
So what you're doing here is building a perfect situation where you pretty much screw the seller into providing everything you need. If it isnt exactly what you want or you don;t get 100% financing, you can walk away from the deal because it didn't meet your conditions. Now also if the seller finds a higher bid somewhere else and tries to sell elsewhere they cannot because they have agreed to meet your conditions of providing everything, and every document you ask for gives you another say 45 days until th deal has to be closed giving you time to get financing and do your DD etc.. Also a great way to see the bank statements to see if teh rent roll and leases have been faked by the seller.
Now as far as Vendor Financing goes you need to add a special schedule to the contract just to cover that part.
1.) Vendor agrees to carry an INTEREST ONLY mortgage in the amount of ___ at ___% for ___ years. (this helps you get better cash flow and more cash to buy)
2.) First Right of Refusal - This si set up so that if the seller decides they want to sell the mortgage they gave you to buy the place to someone else you have first right to buy it.
3.) Protection Upon Default - "In the event of default the vendors remedy is limited only to taking back the property' (this protects you if you default so the vendor can only get repayed from the property)
4.) Right To Repay - Purchaser has the right to repay the mortgage at any time with no penalties or or bonus.
5.) Renewal Option - Purchaser holds option to renew the mortgage in ___ yrs at ___%. (This makes it so that if you sell the property you can sell the mortgage and financing with it to the next buyer increasing your chances of sale)
6.) Interest Only - Makes the mortgage interest only. interest and principle would kill your cash flow.
7.) Subordination of Mortgage - Vendor agrees to subordination of mortgage to any new financing obtained by purchaser at the purchasers sole and absolute discretion etc... (this sets it up so that the vendors mortage will ALWAYS be last on the list. a Hard money lender will not lend you more money ont he property if they are the third mortgage, because it reduces their chances of being paid back if the mortgage is forclosed. So basically you are leaving yourself open to get more financing if needed and walk away from a zero down deal wish cash in hand to go buy other properties...)
So yeah there was a whole lot more on contracts and lots of awesome tips and such he tossed out but thats the basic jist of it all.
So next we talked about Financing in Canada
We talked about Conventional mortgages
Mortgage Brokers and how they can hook you with commercial mortgages and also hard money lenders
Dock loans that mortgage brokers can get you - Basically a loan based on the equity of your purchase, usually only for commercial real estate
and also Hard Money Lenders <-- lots of stuff on the inet about this subject
12:00pm Normally we break for lunch here but today Marc decided we'd go through much to 1:00 and cover Foreclosures and Power or Sale and Pre-Foreclosures
OK so a Foreclosure is then the bank goes to court to get their money because you default. Thats when they supposedly sell your house for cheap to get their money back asap. Problem is in Canada that CMHC will not allow the bank to sell the home for less then Fair Market Value and thus there are no deals to be had on CMHC insured Foreclosures.
Power of Sale is when the owner arranges the sale before it goes tot court. If the bank doesn't recover all of their equity from the sale they can sue the owner for it. No money here either apparently.
So basically you are going to make all of your money in PRE Foreclosures here in Canada
You need to somehow go out and find distressed homeowners that are behind on their payments and offer them a solution before the bank forecloses ont hem and fubars their credit rating.
Just using random numbers here....
So Say someone has missed 5 months of 1500/mth mortgage payments. They owe the bank 7500 dollars in missed payments. On top of that this person is probably deep in consumer debt and they probably havent been paying property taxes and all that jazz, so your going to have to bail them out of that too. So say another 15,000 to get them out of trouble. So lets jsut round that up to 25,000 that you'll need to bail this person out of trouble.
Now what you do is offer to buy their house or assume the mortgage and in return you would bail them out as described above. And in return you work out a deal that any equity in the property minus the cost of you bailing them out will be split between the two of you or maybe 60-40 or something. So say there was 60k equity int he house, you pay 25 to bail them out, that leaves 35 left to be split, so say you give them 20 and you keep 15k, then you sell the house and you pocket the difference.
NOW
The other thing you can do is get that person with the bad credit rating into a Lease option on a house somewhere else, or find a property for them to live in. This is a whole new complicated business. Instead of paying that person the equity from their house you say it can be a downpayment on another house that they would rent to own from you under lease option.
So say they had 20k equity, you set upa rent to own where they are renting off you somewhere at a high rent rate to cover your costs, and you get hem to agree to cover all maintenance etc thus illiminating maintenance and management fees, and put ina clause that they can buy the house off you in 3-5 years or so with a portion of their rent being added to that down payment. But if they default on teh rent you evict their ass and keep the down payment.
Then there was Sandwich Lease Options. Where you find someone rentinga house, make a contract to rent to own that house from them, then sublet the house to the same kind of person mentioned above for a higher rent and basically get cash flow from teh spread between rents etc...
1:00pm
Lunch Time
I went and renewed my registration and had some Edo with double meet and no rice.
2:30pm
Story time. Marc told us a story about condo plans where he sold the wrong codos to the wrong people and lost a lot of money.
2:45pm Some more creative ass financing talk.
10 unit townhouses for sale. FMV for each alone is 125k, vendor was selling all 10 for 1,000,000
Go to the bank and youd get a 75% load for 750,000 and youd have to source the other 250,000 from elsewhere.
So heres what he did, he wrote all sorts of contracts to make this all legal and binding with the vendor then set it up so that the vendor sold him two of the townhouses for 1 dollar each. He held them for 90 days. Then went back tot eh bank and showed the banker that he owned two units worth 250,000 and needed a loan for 1,000,000 for the other 8 in this way he got full financing from teh bank with zero down.
There were lots of stories like this thorughout the day most are pretty complicated and i wont be getting into them here.
Ok
Next Marc gave us all a math quiz to see if anyone could calculate what the return would be if we bought some properties.... I had the closest answer and he applauded me in front of everyone then said I would get a prize.
Then he never gave it to me..... that son of a *****.
What was really funny though was that out of teh 200 people in there only me and this other dude came anywhere near to the right answer.
3:30pm THE PITCH
So the day before they handed out this catalogue of 'Advanced Learning' courses that you can take Everyones 'homework' from the day before was to choose their favorite courses and then Marc asked everyone to take out the books because they were going to talk about it.
I could see what was about to happen to I got up and left. The story the night before about his sick dad and why we all needed the advanced learning made me sick so i couldn't stand to sit there and listen. I sat in the restaurant and ate chicken wings and read a magazine for an hour
When I came back I caught "collectively these will cost 65,000 dollars but today you can have them for 41,000"
I almost choked then went back to the lobby and read some more
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4:30pm I came in a few minutes late as Marc started to talk about Lease Options in detail..
This basically expanded on Sandwich Leasing and Lease Options in general and gave me a crystal clear idea of how I could set this up. It was very informative.
This went on with only one brief interlude into teh sales pitch for about 20 minutes when the most annoying lady in the seminar starting asking retarded questions like "but you said that people come to these seminars on their last dollar how do you expect us to pay for these courses etc.." This was also the same lady that got upset when Marc was telling his sob story about his dad mixed with a "you have to byu these courses because i care bout you so much" because a lady was playing with her cell phone instead of paying attention while marc 'poured his heart out'
After that distraction we went back to lease options again and more in depth on sandwich leasing etc... Again very informative, although there were a few grey areas that I was concerned about but no one else seemed to mind so we went on and finished the day like that.
Teh agenda for tomorrow is Wholesaling and some other stuff i forgot. Also they are going to pull each table into a secret room so the Rich Dad helperscan talk to everyone personally about buying more coursese..... Ergh
