FAQ

What if I don't live in the Houston area? Can I still get foreclosed properties?

Yes! Although we don't have access to foreclosed properties in your area, we will show you how to cultivate 10 to 20 people working for you (for FREE!) to get the same properties we get here in the Houston area, adjusted for your city's median price. Once you find a property from these 10 to 20 people, we will advise you as best as we can on your deal. Real estate is amazingly easy - you can actually predict how many thousands of dollars you will make and how much cash flow you will have every month. We will show you how no matter where you live!

Isn't real estate cyclical and isn't there a crash?

Yes, real estate is cyclical. And prices, like many durable goods, are tied to interest rates.

However, so are stocks, bonds, mutual funds, etc.! In fact, a "crash" in real estate is something like a drop of 10-15%. That is nothing. And in Houston, which has not experienced a bubble, there is no crash.

Now think of a crash in stocks. How about 30-80% drop in price like some stocks in 2001? In fact, even more often there is a "correction" in stocks of 10-15%. On the other hand, in real estate, there is slow but steady appreciation plus your tenant is paying off your mortgage too meaning more equity for you!

No. First of all you can incorporate or LLC. Second, in real estate you have dirt-cheap liability insurance, even an umbrella insurance policy, which more than adequately covers you. Third, there's good landlording skills.

Think how many single-family landlords you know who have been sued...short list, right? Now, think back when RIMM was sued for patent infringement on their Push Technology. What happened to the stock? It bombed. Countless examples of bombing stocks abound - including blue chips. If you owned RIMM, could you have bought liability insurance to prevent any losses from a bombed stock? No you can't (although you could buy put options - which are expensive). But why don't you ask E*Trade if you can buy liability stock insurance anyway - the entertainment value alone would make it worth your while!

What if I'm afraid I can't rent out my property?

Don't be: it's easy to rent out your property because everyone needs a place to live (there's always demand!). To sell (or rent) anything, you need to have the best product at the best price. It's not rocket science! Therefore, you will decrease your rent by $50 - $100 below what the rest of the rental comps are showing. People are not stupid; they will not pay above market price. But rather than miss one or more months of rent waiting to get the price you want, just decrease the rent a little to get someone in your property. Because we take this price decrease into account when we provide rental comps, you should come out ahead this way and still cash flow. This is why residential real estate is our choice for investment - it's just easy to understand.

Why is real estate better than a 401k, 403b, or IRA?

Why real estate beats your matched 401k

We feel that the majority of your investment/retirement money should be put in real estate. The reason is that a simple single family house purchased below market price has a higher ROI than all other investments.

Supporters of 401k's argue that their 401k contributions are matched by their employer and in addition are pre-tax - reducing their taxable income. These days employers are not matching as much as they used to (or at all), but if you are lucky, typical matches are $0.50 for every dollar up to 6% of your salary. They go down from there. Look at this example.

Your typical matched 401k:

• Salary = $100,000.
• Your 401k contribution = $15,000 (maximum for 2006)
• 6% x $100,000 = $6,000. $6,000 x $0.50 = $3,000 contributed by employer.
• $3,000 + $15,000 = $18,000 at end of year.
• Assume you have a stellar year and your 401k mutual fund is up 20% even after all fees.
• 20% x $18,000 = $3,600 profit.
• $3,600 + $3,000 matched contribution = $6,600.
• ROI: $6,600 / $15,000 initial contribution = 44% return on investment

That sounds great right? Sure, except that you're not going to see that until retirement, and you may not even live long enough to enjoy it. In addition, your 401k has to have an incredible 20% year.

Meanwhile, the amount you contribute isn't giving you any cash flow to improve your lifestyle (in fact, your contribution is taking away from your lifestyle). Now consider a typical single-family home (see how our last purchase did):

• Purchase price = $90,000. Market price = $119,000
• Equity = $119,000 - $90,000 = $29,000
• Down payment = $9,000. Rehab = $5,000. Closing cost = $4,500.
• Total spent = $18,500.
• ROI: $29,000 / $18,500 = 157% return on investment

As you can see, our basic real estate deal beats a matched 401k having a stellar year without even breaking a sweat (This FAQ was written in 2006: and it's not that good of a deal compared to now - June 2008). But wait, real estate also provides cash flow that can help you pay your bills. This will never happen with a 401k. Here's the cash flow example:

• Rent = $1000. Or, $12,000 year.
• PITI = $850 / month
• Cash flow = $150 / month or $1,800 year.
• ROI: $1,800 / $18,500 = 9.7% return on investment

The cash flow is tax free money because of depreciation that you can use to live off of. A 401k can never give you cash flow. Let's look at depreciation:

• Land = $15,000.
• Improvements: $119,000 - $15,000 = $104,000
• $104,000 / 27.5 depreciation years = $3781.81
• $3781.81 x 35% tax bracket = $1323.63
• ROI: $1323.63 / $18,500 = 7.1% Return on investment
• You also get to expense your computers, vehicles, GPS, etc. under Section 179 as well as deduct all your other costs. Your "losses" can decrease your taxable income by up to $25,000 under passive activity loss rules which beats the $15,000 maximum 401k contribution in 2006.

Work through the above examples. Also, don't forget that:

• Your house will also appreciate in value during your ownership (but if it doesn't your taxes will be less, and you'll have more cash flow!).
• You can defer capital gains tax when it comes time to sell it.

Thus, just one single-family house purchased below market can beat a matched 401k having a stellar, 20% year. At Mylifechanger.com, we believe that most of your investment/retirement money should go into real estate despite what your financial planner says because the returns in real estate are superior.

Folks, this is not rocket science! You can do this too. Real estate is easy if you learn from someone who is doing it successfully.

Sign up now to start making real estate work for you and your family!

What are the disadvantages of real estate?

The disadvantages of real estate are its illiquidity. However, compared to a 401k or IRA, we'd argue that real estate is actually very liquid since you can't take out your 401k/IRA money until you're retired. If you do try to take it out before then, you'll be penalized your current income tax bracket plus a 10% fee which seems pretty illiquid to us. At least with real estate, you can sell it any time you want. This is another reason why we feel real estate is better than a 401k.

However for all practical purposes, a person whose net worth in real estate is $1,000,000 is actually lower in net worth than someone who has $1,000,000 in stocks. The reason is that there are higher transaction costs involved in real estate; it's not like a $10 commission on E*trade to sell property. In addition, if the person in real estate needed the money quickly, the illiquidity of his/her assets would likely result in having to sell below the market price. Finally, compared to stocks, there are no massive capital gains in real estate (i.e. 1000% ROI).

Nonetheless, Action Clients typically enjoy greater than a 130% ROI, because of the leverage in real estate and by buying at below-market prices. As a result, a person's net worth can be rapidly increased. In fact, the instant equity gained at purchase - along with the equity gained from appreciation and amortization - is very real enough that banks will easily lend on that extra equity (i.e. home equity loan, cash-out refi, etc.). Because of this rapid increase in equity, our opinion is that the advantages of real estate far outweigh its disadvantages.

But what if I know someone who lost $30,000 in real estate?

They did not do it right. Perhaps, they did not buy below the market price, and they paid retail instead of wholesale price. Or they charged too much for rent because they didn't bother getting rental comps before they purchased the property. Or they trusted their tenant and didn't bother to get a credit and criminal check. Or they didn't get a security deposit.

Just like in medicine, carpentry, plumbing, etc. you have to learn from someone who has experience and is successful in the field. However, the one thing you can learn from the person who lost $30,000 in real estate is to listen carefully and learn what not to do.

How do you determine the market price of the house?

The market price of single family houses is based on a Comparative Market Analysis (CMA) based on MLS and government data. Basically, you look at the previous data for similar houses sold in the past year in the same Subdivision with the same sq. ft., year, bed/bath/garage configuration, +/- pool, etc. As a Realtor, we have access to the actual sales data although the public can also obtain valuations at www.realdata.net or www.zillow.com via an Automatic Valuation Model (AVM). Please remember that zillow.com is may NOT be accurate (in fact, I think I read it was banned in AZ)! However, you can use these figures as a starting point. We have found that realdata.net is more accurate but many times is not able to provide an automatic valuation (manual is okay).

The thousands of actual MLS data we have access to give us an manually-derived average dollar / sq. ft. which we use for determining the subject property's market price. This is the most accurate method. In fact, a CMA is the method all licensed Texas appraisers use for single family houses.

Multi-family housing is different in that it is appraised using the income approach. RPA 2008 can help you determine income, cap rates, and cash ROI for single family and multi-family properties.

How do I get started if I am serious about real estate?

1. Save more than you spend, and put that savings towards a down payment, not a mutual fund.
2. Sign up to receive deals by email.
3. Get pre-approved by your mortgage broker or bank.
4. Rehab and lease your property.
5. Live off of the cash flow.
6. Call us for any question you may have.

Why do you charge to become an Action Client?

We had to start charging because Ana was getting too many phone calls from people who were not serious about real estate or were just "kicking the tires." By charging a small fee, we are able to separate those who are serious and focus our help towards these more determined clients.

What are the phases of purchasing and running a property?

The phases are submitting an offer, feasibility or option period, closing, rehabbing, leasing, and selling. The first 4 parts are the most involved. When you find a property you like, you will be faxing offers back and forth as changes to the offer sometimes occur. Once accepted, you will be in the feasibility period where time is of the essence. You typically have 7-10 days where you must go to the property and see how extensive the rehab will be. If satisfied, you can close the deal, take title to the property, and begin the rehab, advertise and lease. Once leased, it is simply a matter of checking your mailbox to collect the rent. There is not much to do except look to acquire your next property.

What about tenant evictions?

The only time we've had to evict a tenant was after taking control of our multi-family. The previous owner had a deadbeat tenant. Do you know how biased the law is here in Texas in favor of the landlord? You probably could've guessed it since Texas is "big", "tough", and has capital punishment.

Basically you post a 3 day Notice to Evict on the front door of your property. After 3 days, you can then file an eviction ($60 dollars) and get a court date in the precinct in which your property resides. 90% of the time the tenant doesn't show up and you win by default. If the tenant does show up, the judge asks the landlord, "Did your tenant pay the rent?" You say, "No, he did not." Then the judge turns to the client and asks, "Did you pay the rent?" "No, sir I did not because..." It does not matter what the tenant says. The gavel slams, and immediately the tenant is evicted. It's that simple.

It's tough in Texas if you don't pay your rent!

How much money do I need?

You need enough cash for the down payment (0-100% of price), closing costs (2-4% of purchase price), any rehab costs, and to support the property for up to 6 months without a tenant, which is extremely unlikely. I've never had a unit go longer than 2 weeks. The cash you need obviously depends on the price of the house. The houses we send out are typically 50k to 110k in asking price, need 0-$5,000 in rehab costs. This means you'll need anywhere from $5,000 to $15,000 in cash.

Remember, however, that your return on this money should be anywhere from 90-300% depending on how much equity is in the house, how much rehab is necessary, and how much you put for down payment (the less down payment, the higher the ROI but the less the cash flow).

Doesn't this take all my time?

No! The most time consuming part of rental real estate is showing your tenant your property. Buying and selling your property is as easy as signing papers. You can avert having to show your tenants your property by posting many photos of your property on the inside of a window (post on the inside so prospective tenants don't rip them off to prevent other tenants from competing for your property). Also, you can post the same photos on a website. Once your property is set up and rented out, there is not much to do but look continue to acquire more units (always be on the lookout for good deals). Tenants take care of their own issues and do not bother you with phone calls (as long as you follow what we teach you in the eBook.)

What about late night tenant calls?

This is a myth. If you follow what we say to do in the eBook, you will not receive phone calls. Nearly all tenants want to be left alone, and do not want to bother or be bothered by their landlords.

Can I quit my day job doing this? How many units does it take?

Yes, you can when you have enough units to pay for your living expenses. BUT we will never recommend quitting your day job at all! First, your day job should become even more enjoyable once you start earning passive income and begin to realize that you aren't tied to your day job to make a living. Second, you're gonna need your day job at first to obtain the cash to aqcuire your first properties.

How much cash flow should I get per month per unit?

Each unit should cash flow average about $200-700 dollars a month depending on how much you finance. At the $200 range, this should be tax free thanks to depreciation. That may not sound like much, but remember that $200 is your phone, internet, cable, cell phone bill. If you have 20 units, that would be an extra $4000 / month, and remember each house has about $20k in equity. When you are starting out, you should start with a few single-family units first.

"I'm scared I will fail. My personality is not strong enough to be a landlord or a saavy businessman. I don't have enough time or money!"

You can do this! Anyone can. First of all, since you will be buying well below the market price, your chances of succeeding are greatly increased.

You are already successful having come this far. The above quotes are all excuses and long-held beliefs that you must overcome. You have to throw away what you've learned all your life about working and saving and contributing to a 401k/IRA. You have to start buying assets that cash flow and are low risk such as real estate. Please read "Rich Dad, Poor Dad" by R. Kyosaki and "Unlimited Power" by A. Robbins.

To get more money, first stop buying things that you don't need and start selling them to get money for a down payment. Then, stop contributing to your 401k or IRA. This may sound crazy, but your 401k/IRA is cash that you could be using to buy properties that cash flow! Right now, contributing to retirement accounts results in losing cash flow each month (in the amount that you contribute) because you don't get to see that money until you're 65. At that point, who knows where the stock market will be, how many fees you would have paid to your "financial planner" or mutual fund manager, or if you will even live to see that money. Don't misunderstand, a financial planner is important. However, even if your employer matches up to 50% of your 401k, you still come out ahead by buying rental properties. Start making real estate that cash flows your "401k"! Who do you trust more? Yourself or some highly-paid CEO that leaves you hanging when the stock falls?

Remember, you must get rid of your long-held beliefs of "work and save as much as you can in your 401k and buy mutual funds until you can retire." Instead you must "work and buy as many cash flowing units as you can until you're satisfied with your passive income."

What is the basic bread-and-butter deal done by Mylifechanger.com?

The houses we purchase are almost always recent-construction foreclosures. We aim to rehab them as quickly as possible with the help of the contacts we've developed over time to get the units rent ready. This is nothing new and countless books, videos, and seminars try to teach this. You can spend thousands of dollars from purchasing and following these books and seminars and not own any real estate in the end. Mylifechanger.com will guide you through the entire process - from acquisition to leasing to eventual sale. We will not charge you money to teach you real estate.

Can I call you if I need advice?

Once you become an Action Client, you can call us 9AM-5PM, Mon-Fri to ask us anything about aquiring, marketing, and renting out your property. Otherwise send us an email for general questions.

How do I get the rebate?

Easy. When you become an Action Client, you will be given an personal reference code. When the new member you bring in mentions either your personal reference code, email, or name to us, we will PayPal him/her $25, and we'll PayPal YOU $100!

Why do your ROI calculations differ from other books or $eminars?

Most books or expensive $eminars state that cash ROI and Return on Equity is simply: cash flow per year / down payment and equity / down payment, respectively. We do not see it like this. We believe that what belongs in the denominator is everything you spend - down payment, rehab, and closing costs. This results in a decreased ratio, but we feel it is more accurate and realistic.

Some believe that you should not include rehab costs in the cash ROI calculation because rehab costs are actually a capitalized cost that adds equity to the property, not a yearly expense. Whatever the case, if we are wrong to include rehab costs in the calculation, then our returns are actually much, much higher.

Doesn't Mylifechanger.com buy all the good ones for themselves and email the rest to their clients?

Mylifechanger.com does not compete with its clients. If no one wishes to submit an offer after 3 days of the Property Alert email, and Mylifechanger.com wishes to submit an offer, we will do so then. In addition, there are hundreds of cash-flowing units to purchase, and no one can purchase them all. This is the main reason why there is no pressure for us to compete with our clients. The housing market in Texas is excellent.

What about a sheriff's sale or foreclosure auction downtown?

There are plenty of ways to acquire real estate: tax liens, auctions, short-sales, etc. The problem with these ways is that you don't know what you're getting. You don't know if there's a clear title or mechanics lien on the property, or if in the case of a tax liens, no guarantee that the owner will not be able to take back the property at some point in the future.

The way we purchase houses is via the MLS. A tried and true method complete with pictures of the property, this allows representation to a clean title via both the buyer and seller broker as well as the title company and attorney. To this day, we have never gone to an auction and bought something we didn't know what we were getting. It is possible that a pre-foreclosure negotiated directly with the owner may offer more equity, but to us, it is not worth the extra time, risk, and effort involved.

What are the limits of Mylifechanger.com?

We are certain we can confidently advise you and help you with single-family and small multi-family properties. This is because we own these types of properties ourselves. Although we are knowledgable with the process of aqcuiring and running a mid-sized multi-family property (20-100 units), we do not own one. Therefore, we are not able to advise you in this case.

However, if you are just starting out anyway, we recommend you purchase a single-family or small multi-family just to get your feet wet. In this case, we would be glad to help you acquire and answer your questions for these types of properties.

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