9 To 5 Millionaire

Question 1

Generational Wealth

Answer 1

looks past monetary value and focuses on the holistic value of wealth by exposing the next generation to a better lifestyle.

Question 2

Guardianship

Answer 2

is the conscious effort to guide your family’s enterprise until the next generation is ready for leadership.

Guardianshipis about taking the long view approach.

Question 3

Generational distress

Answer 3

is the systematic limiting of your family’s chances for success through negligence, ignorance, or carelessness.

Question 4

Passive income

Answer 4

is defined as earnings derived from a rental property, limited partnership or other enterprise in which the investor is not actively involved and there is no exchange of time for dollars.

Question 5

The big 3

Answer 5

Buy-and-Hold, Fix-and-Flip and Wholesaling

Question 6

70% rule

Answer 6

In order to determine whether you should buy a particular property to flip, you must know what to pay for it. The most common formula is called the 70% rule/ARV (After Repaired Value). This means you only pay 70% of the properties current value minus the repair costs.

Question 7

Wholesaling

Answer 7

is getting properties under contract at a discounted price and re-selling them at an increased price to a buyer.

Question 8

Rule #1

Answer 8

Have a purpose for every property you purchase

Question 9

Rule #2

Answer 9

Each property must meet your desired net cash flow.

Question 10

Rule #3

Answer 10

You must add value to every property

Question 11

Rule #4

Answer 11

You must get your initial investment back

Question 12

Rule #5

Answer 12

Every property must be in an area with room to grow.

Question 13

ARV

Answer 13

After Repair Value

Question 14

3 C’s

Answer 14

• CLEAR on the numbers and knowing what it’s worth to you.
• CONSCIOUS of the decision-making process to make an informed, educated purchase (not just buying real estate because it looks or sounds good).
• CERTAIN so you are free from doubt. You must be able to make the right decision.

Question 15

LTV

Answer 15

Loan-to-Value Ratio is a financial term used by lenders to express the ratio of a loan to the value of an asset purchased.

LTV or Loan-to-Value is all about how much money is owed on your mortgage, or loan, in relation to how much your property is worth.

Question 16

How to figure out/ Calculating the ARV

Answer 16

Purchase Price ....... $100,000.00
Rehab Cost .........$100,000.00
= $200,000.00
Divided by 0.70
ARV = 285,000.00

$285,000.00
x 0.70
Maximum investment = $199,500.00

Question 17

Making It Real

Answer 17

Purchase Price= $88,000.00
Rehab Price = $100,000.00
Total= $188,000.00

ARV= $300,000.00. 👍🏾
Equity= $112,000.00
Gross monthly income= $3,750.00
NET Monthly income= $1,100.00

AVAILABLE EQUITY (took out an additional) $22,000.00 (which will reduce the NET income by $200) may allow you to purchase another property making you an additional $1,000.00 a month.

Pay attention to the numbers. Each property must have the ERV, the EQUITY and INCOME.
If you don’t have all three it’s not a good property!!!!!!!!!

Question 18

R. E. Broker Recap

Answer 18

• Develop a personal relationship with your broker.
• How to estimate the ARV of a property.
• 3 critical components to a deal
  • net cash flow.
  • high enough ERV to meet 70% rule.
  • enough equity in a property to regain initial investment.

• What to look for in a R.E. Broker.

Question 19

Residential Loan

Answer 19

Residential loans are for properties that have 1 to 4 units. All larger multi-family properties (5+ units) require commercial loans. These loans traditionally come from banks and in order to qualify you must meet whatever criteria they have. These loans have a number of stipulations (credit score, income, work history, reserve funds, etc.) but typically have the lowest interest rates with the longest terms. They are in it for the long haul. These loans are used by investors who plan to own their properties for longer than a year in order to collect cash flow and equity through value appreciation.

Question 20

Seller Financing

Answer 20

is an agreement where the seller carries the mortgage instead of a financial institution or another investor. Instead of applying for a conventional bank mortgage, the buyer signs a mortgage with the seller. The seller becomes the bank. This typically happens when a seller owns a home outright and isn’t in dire need of cash.

Question 21

Prívate financing

Answer 21

requires increased down payment, 3+ points (fees charged by the lender based on the risk perceived, 1 point is equal to 1% of the loan amount), the interest rate will be higher than standard, loan terms are very short (3 – 6 months) and often include a pre-payment penalty. A pre-payment penalty is a lump sum of money (or expected interest) due if the loan principal is paid back in full before its full term.

Question 22

Hard money loans

Answer 22

require the buyer to deposit 10% - 20% as a down payment, 1-3 points, closing cost 3% - 5% of the loan amount. These loans have much shorter loan terms such as 3 months – 1 year. There is no pre- payment penalty as the lender wants you to pay the loan off quickly. Hard money loans typically close within 7 -10 business days. The funds are often provided based on a series of inspections and draws. In other words, once a portion of rehab work has been completed, an inspection is ordered. If the completed repairs are done to code and pass inspection, then the requested funds will be released and deposited into your account. This option may also include a pre-payment penalty.

Question 23

Mortgage Banker (Company)

Answer 23

Firms that lend their own money. These are banks and mortgage companies that lend funds for the purchase and renovation of real estate directly to you. When seeking a loan from a lender like this there are certain levels of protection ad or restrictions provided by governmental loan restrictions concerning fees, terms and interest rates.

Question 24

Mortgage Broker

Answer 24

Firms and/or individuals that lend money from other banks. These are lenders that will search multiple banks, funds, credit unions, etc. to find a lender with favorable terms for a fee (the fee is usually paid in points). The interest rates will be slightly higher than from a mortgage banker. This type of lender is important to the industry because the mortgage broker may be able to look past some minor infractions on the qualifying rules and allow an approval of a loan that otherwise may have been denied.

Question 25

Hard money lender

Answer 25

Firms or individuals that lend money to investors at higher interest rates and loan fees. They may require the same or similar credit worthiness (score required 600+), increased down payments 10% - 20%, loan terms (3months – 13 months) and LTV (loan-to-value) at 50 – 100%. Hard money lenders are willing to close the loan quickly (7-10 days) and will often allow the loan to close with some building code violations, if the violations will be cured with the renovation of the property. With hard money loans, you need a solid exit strategy (i.e. a plan to pay the loan back). Loan extensions are available; but they can cost anywhere from 1% - 3% of the loan amount. Remember, these are most often interest only loans; meaning, all payment you are required to make will go towards the accrued interest not the principal. The principal balance remains the same as when you signed for the loan, any increase in the loan costs will reduce your profit. Again, some of these loans will have pre-payment penalties.

Question 26

FHA

Answer 26

Federal Housing Administration

Question 27

Prívate money lender

Answer 27

Individuals willing to serve as lender on property for an equity stake in the property. Interest rate may be higher, closing cost increased, loan terms shortened to 3-6 months and LTV reduced (50-60%). These lenders will close in as little as 3 days depending on the lender. The loan terms will be short here so make sure you have a solid exit strategy. Loan extensions may or may not be available; so be sure to read the loan terms carefully. Again, this is an interest only loan, any increase in cost reduces your profit.

Question 28

Hard Money Feed

Answer 28

• monthly interest payment between 7% to 11%
• an origination fee ranging from 1% to 3.5%
• a processing fee from $500 to $1000
• appraisal fee- ranging from $300 to $500 (depending on the property)
• title and construction fees

Question 29

Bandage loan

Answer 29

6-8 unit (de-convert into a 4 unit and live in it for one year)

3-4 unit (purchase as a regular or rehab loan and live in it for 1 year)

Bandage loan gives you the ability to get into a property for the lowest down payment amount. Mandatory to reside in the property for 1 year as primary residence.

Question 30

Entity

Answer 30

Something that has separate and distinct existence and objective or conceptual reality.

Question 31

Limited Liability Company (LLC)

Answer 31

An LLC works as a type of business entity that provides both liability protection for owners and members and pass-through taxation.

Question 32

Corporation

Answer 32

A corporation is a company or group of people authorized to act as a single person entity (recognized as a legal person by the law) in which the owner exhibit control through the shares they have in the company.