Book Review 012: Rich20Something by Daniel DiPiazza

In his book, "Rich20Something", Daniel DiPiazza discusses how he left a low-paying job he despised, became a millionaire entrepreneur and wrote this book in his 20s. He provides actionable tips on how each reader can create their own success by leveraging their talents and following the "Go! factor" recipe for success.

Main Ideas:

  • You no longer have to pay your dues.

  • The game has changed – and you can make your own rules.

  • Money is easy, thanks to the Internet.

  • Writing and sharing valuable digital content is an excellent way to build your brand.

  • Use “nonlinear networking” to cultivate contacts who can help you achieve your goals.

While working at a chain steakhouse restaurant scooping butter for $2.17 an hour, Daniel DiPiazza knew that he needed to find a more meaningful job that also had a scalable pay structure. In 2011, after earning $10,000 from only working five hours, he soon launched three consulting companies worth $100,000 each without any start up capital. DiPiazza tells us that by disowning any limiting beliefs and unlocking our own potential, we can drastically improve our life and career.

Here are "three new truths" that he shares with all readers:

1. “You No Longer Have to Pay Your Dues”

The great Jim Rohn once said, "You don't get paid by the hour. You get paid for the value you bring to the hour. You may often hear people in your circle say, "that's too risky" or "you can't do that". Well, if every entrepreneur and successful business person agreed with those words, they would have never gotten started. Times have changed since the days where going to college and working 30-40 years moving up the corporate ladder is viewed as "stable".

We saw in 2008 where many W2 workers, both blue and white collar lose their jobs when the economy tanked. Having a job is no longer "safe", nor should you equate "butt time" (sitting down at your desk working for the man) with experience. DiPiazza challenges the readers to be creative in how we identify and leverage our skills. As film, TV and video game producer Jace Hall explains, “you do not have to pass through point B to travel from point A to point C.” In this “generation of hackers,” be original.

2. “The Game Has Changed – and You Can Make Your Own Rules”

Whether you realize it or not, there are many successful people who have identified the new game and have started to make their own rules. This game allows people to leverage other people's time, knowledge, and money to reach their own goals. The rules of the game are not taught in college, in fact, college teaches us to become better workers, when we are no longer in the industrial age, we are in the information age. To play the game to your advantage, embrace the most valuable tool there is: knowledge. Knowledge comes from thinking outside the box, believing in yourself and knowing how to persevere.

Be the person who can identify a challenge in different environments and offer solutions to the problem. Becoming a critic is easy, execution is hard. DiPiazza tells us to consider taking on broadening experiences such as these, in lieu of or in addition to college: Explore the world, establish a business, volunteer, learn a foreign language, create art, play a competitive sport, master something you love or write a book. You’ll need to do something that excites you and that you can leverage for success.

3. “Money Is Easy, thanks to the internet”

The internet has certainly connected us, and it has also made starting business with little to no capital fairly attainable. Back in the 1800-1900s, money was tight; the coal, steel and oil barons controlled the markets; and women and minorities weren’t part of the equation. Today, although common wisdom holds that making money is difficult, money is really everywhere. People can earn income doing things with little risk and big reward, thanks to the Internet. For example, you can start a blog using free software, or buy and sell products around the globe.

As mentioned previously, execution is the most difficult challenge entrepreneurs will face. If you’re good with managing your time, your persistence will pay off. DiPiazza tell us to break big goals into bite size chunks. For example, to make $1,000,000 in a year, you need to generate approximately $2,700 daily. Think of how many people you can help each day. You could bring in $1 each from 2,700 people – or $10 each from just 270 customers. Determine what you can offer and at what price.

By leveraging these three main concepts, we can break from the status quo and realize that others people's success can become our success. Instead of resenting the people on social media who seem to have everything you want, go network with them and figure out how you can recreate the same success. It’s not about the money, but the choices that having money will be able to give you.

Do you want to be able to retire your parents? Would you like to take two months to travel around Europe? Do you like to volunteer and build homes in rural areas? If you are focused on climbing the corporate ladder and paying the bills, you will not be able to see the things around you, the things that make you passionate, the things that fulfill you. Whatever season you are at in life, remember that conventional wisdom is no longer "safe" and that its not what you know, but what you think you know that may prove to be an obstacle in reaching your goals.

Hope you enjoy this book!

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Real Estate 034: Real Estate Hard Money Lenders

In previous blog posts, we have discussed various financing strategies such as conventional lending, private money, home equity line of credit, and seller financing. You may have also heard the term hard money lending (HML) from Real Estate meetups and forums. When compared to a private money lender, hard money lenders are individuals or group of individuals that lend their money based on the value and cash flow of the subject property and not the net worth, credit history, or liquidity of the individual borrower. 

Hard money lenders are typically more sophisticated and have industry experience. As these loans are being made based on the asset, there is inquiries and reviews performed on the property through an inspection, drive by, and/or walkthrough, as well as the business plan, such as the rehab bid and ARV projections through an appraisal, Comparative Market Analysis (CMA) or Broker's Price Opinion (BPOs).

The benefits of working with Hard Money Lenders is that they are professionals that understand the needs of the deal. In a hot market, speed is crucial, and some hard money lenders are able to close in 7-10 days from signing the purchase agreement. 

When interviewing various Hard Money Lenders, they will generally give you a fee sheet that include their sample terms as follows: 

  • Amount Financed - Maximum purchase and/or rehab price

  • Interest Rate - APR (yearly) interest terms on the deal (Recourse vs Non-Recourse)

  • Origination Fee or Loan Points - Pre-paid interest where 1 point equals 1% interest of loan amount

  • Closing Costs - Escrow Fees, Document Fees, Notary Fees

  • Loan Term - Duration of the loan and any allowable extensions

Below is a sample pre-approval I received from my Hard Money Lender:

"Hello Bo, we have you pre-approved you at 90% of purchase price plus 90% of repairs, subject to appraisal requirements for a combined purchase price plus repair amount of up to $225,000.  Final approval is subject to review and approval of the property, budget, appraisal, and final funding source approval.  The interest rate is 10% fixed, interest only monthly payments, no prepayment penalty.  

There is a 2% origination fee for repairs under $50,000 and 2.25% origination fee for repairs exceeding $50,000 plus $385 processing fee and third party closing costs. (Higher pricing for loan amounts under $100,000). This loan term will be a six month loan with an automatic six month extension, so it can go up to 12 months in total.

The monthly extension fee beginning in month 7 is the loan amount times .0033 per month and is added on to the pay off at the end of the loan for any of the extension months used for months 7 through 12.  Attached is a preapproval letter for a purchase price up to $175,000, leaving $50,000 for rehab.  Please let me know if you have any questions or if you would like a letter that is property specific. Thanks!"

Based on my experience, I noted that the hard money lending process was as follows: 

Step 1  – Pre-approval. 

Step 2  – Place a deal under contract within the price range noted in the pre-approval.

Step 3  – Inform the HML of the subject property under contract and outline of estimated rehab costs (if any) along with ARV. 

Step 4  – Appraisal, CMA, BPO, or walkthrough of subject property.

Step 5  – Underwriting of deal and adjustments (if any) to purchase/rehab loan amount.

Step 6  – Final approval and closing.

Step 7  – HML puts the loan amount into escrow at the title company or the lender will schedule draws (varies from lender to lender) to be taken upon successful completion of the rehabs in various tranches. 

Step 8 – Complete rehab and obtain long term financing or sell to a buyer to pay off HML.

In conclusion, Hard Money Lenders are a great source of capital, especially for borrowers with experience, good deals and a need to close fast. 

As always, please make sure you do your due diligence and talk to your CPA/Attorney/Financial Adviser before making any investment decision.

Good luck!


Real Estate 033: What is Driving for Dollars?

For investors who are just starting out, there are many great options to gain experience and get your feet wet with little to no money out of pocket. I recently attended a 3-day real estate investing bootcamp where they introduced various concepts from buy and hold, fix and flip, wholesaling to multifamily. One of the strategies mentioned during the bootcamp was "driving for dollars".

For those who are not familiar with the term, driving for dollars describes a method whereby investors drive around neighborhoods and look for properties that look distressed or vacant and contact the owner of the home to make an offer on the property. You may have seen these types of homes in your very own backyard. They may have broken/boarded up windows, tall grass, and no signs of tenants/homeowners. This is a very manual method of lead generation, and as you may have guessed, not the most scalable and time efficient method either.

Wholesalers typically may use lead generation software to identify non-owner occupied homes that are in foreclosure, financial distress, short sales, FSBO (For Sale By Owner) among others to conduct their direct mail campaign and qualify leads. However, sometimes people hire others to assist in their efforts. A subset of driving for dollars can be referred to as "bird dogging", where these individuals find the distressed properties during their drives, and send it to a wholesaler or investor willing to pay for that lead. 

Note: Please make sure you do your proper due diligence and check with local laws and regulation to ensure that what you are doing is allowable/legal. Varies by State.

Once you have found a lead, you now need to contact the seller to figure out their motivation and "qualify" that lead. Lead qualification can quickly be done with three questions:

  1. Tell me about your property - Let the seller do the talking, and you will realize they may sometimes reveal much more than you sought. I have often encountered sellers disclose the amount of debt (e.g. line of credit, mortgage) remaining on the home, personal distress (e.g. death, divorce, or health issues), and other information that will help you understand the seller's motivation as well as strategies to purchase the property. For example, a seller looking to quickly move to another state may entertain a buyer taking over the property "subject to" the existing financing. On the other hand, a seller needing to pay off an existing debt may consider a full payment of the existing debt, and owner finance the remainder of the equity.

  2. What would you like to be the outcome? - This question will reveal what the seller has thought of in regards to terms and price. If you listen attentively, you may find the seller negotiate against themselves and give you more equity that you thought possible. Remember we are looking for sellers that need to sell, not want to sell. 

  3. If we were to reach an agreement, how fast do you want to close? - This question will separate the tire kickers from the motivated sellers. If a seller response with "less than 30 days", this is a sign that they are willing to hear reasonable offers and proceed with the transaction. The last thing you want to be doing is deal with sellers who simply "want" to sell may throw out unreasonable terms or price that eventually waste your time.

Once you have qualified the lead and negotiated the deal, place it under contract and control the deal. Maintaining control of the deal is the most important part. Once you have a good deal in your hands, now you have the option to use various strategies such as wholesale, fix and flip, or buy and hold. Since you have performed your own lead generation efforts without a middle man, it is more than likely that there is extra equity in the deal. In conclusion, driving for dollars is a great way for people who are starting out to network with other investors by sending them leads, and or acquire their own property with little to no marketing costs upfront.

As always, please make sure you do your due diligence and talk to your CPA/Attorney/Financial Adviser before making any investment decision.

Good luck!