June 2022 – REI INK

Investing with Purpose: Having Real Intentions in Real Estate With Donovan Ruffin

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If you want people to work with you, you need to be leading with value. Don’t make every meeting you have a business transaction. You need to actually want to help people so that they will work with you. You can’t grow your business if no one wants to work with you. This is exactly what Donovan Ruffin did when he founded Equity Cash Offer. He’s only 28, yet he buys and sells houses all over Texas while also going into new markets. He does this because he’s actually doing the work and grinding it out. Join Tim Herriage as he talks to Donovan about how he grew his business, Equity Cash Offer, especially at a time when interest rates are rising. Listen in for some great advice on how to get started in real estate. — Watch the episode here Listen to the podcast here Investing with Purpose: Having Real Intentions in Real Estate With Donovan Ruffin Welcome back to the show. I’m here with an all-star, Donovan Ruffin. Donovan, thanks for coming by. Thanks for having me. You are the CEO of Equity Cash Offer. Why don’t you take a second and tell everybody a little bit about yourself, who you are and what you do? I live here in Dallas-Fort Worth McKinney, Texas. I own a company called Equity Cash Offer. We buy and sell houses. We do mostly wholesale. We do fix and flips, buy and holds and a little bit of commercial. We do business all over Texas. We’re going to enter some new markets in Florida, Atlanta, North Carolina and South Carolina. We’re growing. I’m super impressed with you. You remind me of myself when I was young, except you do a lot more than me. The first thing we do is the BLUF, the Bottom Line Up Front. The Bottom Line Up Front is when I was in the Marine Corps, we’d briefed generals. They always told us, “You never bury the lead because the general may have to get up and leave. You may start getting mortar or fire. You need the general to know the most important thing.” In that context, I want you to tell the reader about the real estate market, trends you’re seeing, things you’re thinking about and things that people should be focused on or watched out for. It is two minutes of the state of the market according to Donovan Ruffin. The real estate market is very interesting. You have interest rates rising. Prices of real estate are a lot different than what it was years ago before Corona. I did market research. In Dallas-Fort Worth alone, houses are selling for about $178 a square foot on average. Before Corona, it was about $118 or $119. If you look at the dynamics of it, when you’re getting into real estate, you want to be careful about the exit strategies and your intention. Going into the real estate market, we’re focused heavily on if we’re going to buy it and put work into the house, we’re looking to keep it forever. If you look at history, 100 years ago, houses were a lot different than what it is because of inflation. Time has changed and things of that nature. You can’t lose if you have intentions of buying properties to keep them forever. That’s what we’ve been focused on. There are tons of advantages to that. You have tax cost segregation with rentals and cashflow with rental properties. With that, you have leverage because you can dabble and have more bankability. Most importantly, it’s a legacy for your family too. You’re not getting paid once off a wholesale or flip because you put all this work into getting a property, acquiring it and selling it or fixing it up and then selling it. You’re fixing it up, putting a stable tenant in there and then keeping it forever. That’s what our main intention is with the market, especially with interest rates rising. We aren’t focused on, “Is the market going to crash?” We’re excited about prices going from $178 a square foot to a lot lower because of what they used to be. That’s my take on the real estate market. You can still make a lot of money wholesaling or fixing and flipping but you get paid once versus paid forever. There’s a lot to unpack in that legacy. Your Instagram has become one of my favorites. Mainly because I was about your age when I had my first kid. You do post about your house stuff but it has 80% of the little knocks on there. That legacy means so much more. It’s not about the money, watches, cars or houses. It’s like, “Let’s level our kids up.” I learned a lot being in this business for years. I humbled myself a couple of years because the IRS wants their money. You can make a lot of money but you still have to pay taxes. I was the type that was like, “$300 of cashflow isn’t that inspiring.” Now, I don’t need the money from a fix and flip. I’d rather keep it, maintain that property and keep it and my family forever. You were talking about houses and what they used to cost. I’m working on a project in Downtown Rockwall. It’s a historic house. When it was originally built in 1885, it was 1.5 acres. The cost, when it was first sold in 1905, was $5,000. That’s for a 2,500-square-foot house on 1.5 acres in Downtown Rockwall. Now, it has been parceled up and it’s about 3-quarters of an acre. We bought it for $550,000 and it was appraised for $1.25 million. When you talk about forever, it’s exciting stuff. You pencil that in on a $100,000 house. From the wholesale, fix and flip, rentals, commercial or multiple markets, what is it that is challenging you? Is it personnel management, cost of money or not enough inventory? What are

Wholetailing: Flipping Real Estate With No Money With Travis Johnson

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Have you ever thought about flipping real estate deals but don’t know how to do it? You’re not alone. Travis Johnson, a successful house flipper in Minnesota and author of the Seven Figure Flipping Book, learned how to flip real estate the hard way. With no books or training when he first started, he did everything wrong and took financial losses. Today, Travis shares his experience on how to get involved in flipping real estate deals with no money, wholesaling strategies, and treating real estate investing as a real business. Tune in! — Watch the episode here Listen to the podcast here Wholetailing: Flipping Real Estate With No Money With Travis Johnson Welcome to the show. With me in this episode is Travis Johnson. Travis, how are you? I’m very good. Thanks for having me here. I knew you from a mastermind but why don’t you take a minute to tell the reader a little bit about yourself? I’m based out of Minneapolis and the St. Paul area of Minnesota. I started investing part-time in real estate in 2001. I went full-time in 2016. I built my business from the ground up and doing quite well at it. I do a lot of rural investing. I also do a lot of the metropolitan where all the other investors are at. I like to start these episodes with what I call the bottom line up front. When I was in the Marine Corps, they always told us we had to tell the general the most important thing as soon as the briefing started in case he had to leave the room. Take two minutes. Talk to the reader about what you think the most important things are that they need to be paying attention to or doing in this market. That’s a pretty broad question that you’re asking me to answer but I can best answer it in regards to interest rates having a huge play. Over the last couple of years, interest rates have been fantastically low. When you purchase a house, if you had another contract and there was delay after delay, it didn’t matter. The values kept going up. It was an easy extra payday. Now, you have to pay more attention to interest rates going up. If you’re buying a higher-value house, you have to pay attention to that. The main point I would say is to pay attention to interest rates but also get out there and do stuff in regards to investing because wholetailing, which we can dive more into the show, is working well and will continue to work very well in the near future. I also have my little secret strategy as to how to invest in the rural market. We’re going to talk about wholetailing and rural markets. I love the interest rate conversation. It’s one of those things that I’m always having but let’s go back. What is a wholetail? How I define wholetailing is actual wholesaling. That’s where you get a property under contract with a motivated seller and then you’re going to find an investor that’s going to want to buy that contract from you on an assignment basis. You’re wholesaling it from the motivated seller to the end cash buyer and you’re making a fee in between. On the wholetail side of it is retail. If you take the retail side, you’re selling it to the consumer. It’s someone that’s getting a bank loan typically for the property. The property has to be in lendable condition. All the safety issues are taken off the table. Not having a collapsing deck is a good example but it is move-in ready other than it probably needs updates. That’s a good way to look at it for wholetailing. If you can do the actual wholetailing and eliminate the wholesaling part knowing that you’re going to capitalize very fast on turning around your wholesaling to a cash investor but it’s to an end-user or the person that’s going to cash you out on the retail end, you would make huge margins on your deals. How does that work? Are you charging full price? Is there a discount? What do the numbers look like? In the last couple of years, it has gone through the roof that what I thought was well over retail for a nice house. That’s what wholesaling was getting. Now, the retail price is going even higher so it’s back-filling. That’s how it works in regards to that. For me, the better answer is, for example, a house all fixed up was worth $150,000. It’s move-in ready. The paint colors are neutral. The carpet is in. The hardwood, floors are done. Everything’s fine about the property. I’ll wholetail it for $150,000. I’ll probably sell it for about $130,000 or $140,000. There is a slight discount underneath but you’re hardly doing any of the work on the inside. The nice thing is you’re getting this thing on the public market. Yes, MLS. For some people that wholesale or assign properties, part of their problem is they can’t test the public market to get the maximum price. You’re going to have to take title to the property. There’s no way around it. Is this an inner-city thing? Is this a rural thing? Where do you find this strategy has the most bang for your buck? I’ve been fortunate to be very successful even in the rural markets. I’m doing that strategy a lot but if you want the biggest return, go to the heavy metropolitan areas where it’s a dense population. You’re going to make insane numbers doing the wholetailing strategy. How long have you been doing this? I’ve been doing it full-time since 2016 but investing part-time since 2001. What’s been the best part about it for you? The financial freedom and flexibility with family schedules. We have four kids. Being flexible with school schedules and getting everyone where they need to be, that’s what

How Your Profit Margin Compares To Your Margin Of Safety With Logan Fullmer

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If you just found a good deal but got stuck with legalities, you can’t miss this episode of Uncontested Investing! Logan Fullmer joins Tim Herriage and shares his journey from managing construction in the oil field to finding real estate success through discounted deals. Not too long after starting his real estate journey, Logan saw himself earning over a million dollars on a single deal! Tune in as he talks about how he invested in educating himself about property codes and researching case law and some insights into how curative title work and resourcefulness have helped him take calculated risks between profit margin and margin of safety and closing deals at discounted prices. — Watch the episode here Listen to the podcast here How Your Profit Margin Compares To Your Margin Of Safety With Logan Fullmer Thanks for stopping by. Logan Fullmer is with me. Logan, how are you? I’m great. Good to see you. It’s good to see you. Logan is someone I have been watching on social media. You are putting on these big seminars that aren’t typical seminars. It’s to teach people, which I find interesting. Why don’t you take a minute and tell people a little bit about yourself? Thanks for letting me come. This is fine. I enjoy doing this stuff. It’s become part of things I’ve done over the last few years. You get busy working down in your lane and it’s neat to share if I know what else going on. Here I am. I do some educational stuff. I have been anti-guru, and anti-real estate education because there’s a bad name. I do have a very unique component to my business and it always blows people away. I’ve spent more and more time talking to people and giving advice on sharing information online. I’ve gotten literally hundreds of people asking for this content. After a couple of years, I finally decided, “If I can do this, make a little bit of money doing it but deliver what is the best amount of information I can I will do it.” It’s curative title work. This is stuff nobody cares about, except for when you can’t close a deal. The title company says, “Where’s your Schedule C, so and so? You got to fix this.” It’s either simple. The title company might help. You got to call a lawyer or even the attorneys throw their hands up. That’s when I show up. I’ve seen some of your deal numbers. We are going to get into that in a little bit. Some people are like, “Title work.” Why do I care about the title? Do you want to buy property at $0.10 on the dollar? They care about title work. Everybody cares at that point. One of the first things we do every week is what I call the bluff, the bottom-line upfront. What that is? I learned at the Marine Corps. I used to be brief generals. They always said you had to give them the bottle upfront in case there’s a mortar attack or they have to get up and leave the room because generals get busy. What I like to do is I’m going to give you about two minutes and tell the audience the most important things they should be doing, looking at, watching trends they should be following the most important things that in your mind people should be watching in real estate. Two minutes you are on the clock. One of my favorite things to tell people is your profit margin is also a convertible margin of safety. I’ve never heard anybody say it that way but that’s how I think about it. When I go into a deal, what’s most important is to say, “How am I going to lose my money? How am I going to risk principle?” That’s the first rule. If I can measure all my risks, attach dollar amounts to them, and decide that I’m not going to lose any money, then I realize there’s an investment thesis here to build on. From that point, we start talking about maybe making some profit? How’s that going to look? What are the risk components? Can we afford all these things? It’s looking at the margin of safety and the profit margin, which are the same thing. It’s profit when things are going well. It’s a margin of safety when things go bad. It operates together. I look at that with real estate businesses, other businesses through manufacturing businesses or other operating businesses we own now that it came from our real estate. Are you an attorney? No. How can you be smart enough to do curative title work without being an attorney? The way folks do that does a good job in formal education. I struggled in school big time. That’s the most common thing for our guests. I did badly in that format. I took seven years to get a Bachelor’s degree. I got bad grades in high school. I run into problems and didn’t like the answers to those problems. I have a bullheaded attitude of, “I’m going to fix this at all costs.” I had to learn as I got older that all costs aren’t always the answer but you can go deep. I spent the time paying lawyers to teach me how to read the Property Code, the State’s Code, the Tax Code, and the Probate Code and taught me how to research Case Law. Once I realized that’s where these answers would come from, that’s where I started digging. Every time I would have a problem, I would go figure out how to solve it and hire an attorney or attorney team and say, “I need you all to litigate this. Here’s how we are going to do it.” You mentioned something earlier to me about the oil fields. Were you solving problems out there too? No. I was trying to make a living. I had

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Nearly One-Third of Average Wages Required for Major Home-Ownership Expenses During Second Quarter of 2022; Portion of Wages Consumed by Home Ownership Rises at Fastest Pace This Century; Historic Affordability Plummets to 15-Year Low as Median Home Price Hits $349,000 and Mortgage Rates Top 5 percent ATTOM, a leading curator of real estate data nationwide for land and property data, released its second-quarter 2022 U.S. Home Affordability Report, showing that median-priced single-family homes and condos are less affordable in the second quarter of 2022 compared to historical averages in 97 percent of counties across the nation with enough data to analyze. That was up from 69 percent of counties that were historically less affordable in the second quarter of 2021, to the highest point since 2007, just before the housing market crashed during the Great Recession of the late 2000s. The report also shows that the portion of average wages nationwide required for major home-ownership expenses has risen this quarter to 31.5 percent as the median price of a single-family home has hit a new high of $349,000 and 30-year mortgage rates have shot up above 5 percent. The percentage of average wages consumed by those expenses has risen at the fastest quarterly and annual pace since at least 2000. “Extraordinarily low levels of homes for sale combined with strong demand have caused home prices to soar over the last few years,” said Rick Sharga, executive vice president of market intelligence at ATTOM. “But homes remained relatively affordable due to historically low mortgage rates and rising wages. With interest rates almost doubling, homebuyers are faced with monthly mortgage payments that are between 40 and 50 percent higher than they were a year ago – payments that many prospective buyers simply can’t afford.” The report determined affordability for average wage earners by calculating the amount of income needed to meet major monthly home ownership expenses — including mortgage, property taxes and insurance — on a median-priced single-family home, assuming a 20 percent down payment and a 28 percent maximum “front-end” debt-to-income ratio. That required income was then compared to annualized average weekly wage data from the Bureau of Labor Statistics. Compared to historical levels, median home prices in 560 of the 575 counties analyzed in the second quarter of 2022 are less affordable than in the past. The latest number is up from 459 of the same group of counties in the first quarter of 2022, 397 in the second quarter of 2021 and just 251, or less than half, two years ago. That increase has continued as the median national home price has spiked 16 percent over the past year while average annual wages across the country have grown just 6 percent. Major ownership costs on median-priced single-family homes and condos around the U.S. now require more than 28 percent of the average $67,587 wage in the U.S. – a ceiling considered affordable by common lending standards. The current level of 31.5 percent stands at the highest point since the second quarter of 2007 and is up from 26 percent in the first quarter of 2022 and 23.9 percent in the second quarter of last year. Both increases mark the largest jumps since at least 2000. Affording a home across the nation has gotten significantly tougher in recent months at a time when the U.S. housing market has roared ahead for the 11th straight year but also faces notable headwinds that could slow it down. One major force remains: home prices have continued to soar in 2022 as a large cohort of homebuyers continues chasing an extremely small supply of properties for sale. Elevated demand has helped push the national median home price up over the past year at more than double the pace of wage growth. But as mortgage rates have steadily climbed this year from just above 3 percent to near 6 percent for a 30-year loan, costs have escalated for buyers. Higher interest rates, growing inflation, soaring fuel costs and a declining stock market all threaten the housing market, which could already be showing signs of strain – May marked the fifth consecutive month of lower existing home sales than the prior month. As historic affordability continues to decline, major home-ownership expenses on typical homes are now unaffordable to average local wage earners during the second quarter of 2022 in 388, or 67 percent, of the 575 counties in the report, based on the 28-percent guideline. The largest populated counties that are unaffordable are Los Angeles County, CA; Maricopa County (Phoenix), AZ; San Diego County, CA; Orange County, CA (outside Los Angeles) and Kings County (Brooklyn), NY. The most populous of the 187 counties where major expenses on median-priced homes remain affordable for average local workers in the second quarter of 2022 are Cook County (Chicago), IL; Harris County (Houston), TX; Philadelphia County, PA; Franklin County (Columbus), OH, and Hennepin County (Minneapolis), MN. Home prices continue to rise at least 10 percent annually in two-thirds of country Median single-family home and condo prices in the second quarter of 2022 are up by at least 10 percent over the second quarter of 2021 in 373, or 65 percent, of the 575 counties included in the report. Data was analyzed for counties with a population of at least 100,000 and at least 50 single-family home and condo sales in the second quarter of 2022. Among the 47 counties in the report with a population of at least 1 million, the biggest year-over-year gains in median sales prices during the second quarter of 2022 are in Collin County (Plano), TX (up 28 percent); Hillsborough County (Tampa), FL (up 27 percent); Maricopa County (Phoenix), AZ (up 25 percent); Clark County (Las Vegas), NV (up 24 percent) and Salt Lake County (Salt Lake City), UT (up 24 percent). Counties with a population of at least 1 million where median prices have gone up the least or decreased, year-over-year, during the second quarter of 2022 are Oakland County, MI (outside Detroit) (down 2 percent);

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S&P Dow Jones Indices (S&P DJI) released the latest results for the S&P CoreLogic Case-Shiller Indices, the leading measure of U.S. home prices. Data released for April 2022 show that home prices continue to increase across the U.S. More than 27 years of history are available for the data series and can be accessed in full by going to https://www.spglobal.com/spdji/en/index-family/indicators/sp-corelogic-case-shiller/. YEAR-OVER-YEAR The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 20.4% annual gain in April, down from 20.6% in the previous month. The 10-City Composite annual increase came in at 19.7%, up from 19.5% in the previous month. The 20-City Composite posted a 21.2% year-over-year gain, up from 21.1% in the previous month. Tampa, Miami, and Phoenix reported the highest year-over-year gains among the 20 cities in April. Tampa led the way with a 35.8% year-over-year price increase, followed by Miami with a 33.3% increase, and Phoenix with a 31.3% increase. Nine of the 20 cities reported higher price increases in the year ending April 2022 versus the year ending March 2022. MONTH-OVER-MONTH Before seasonal adjustment, the U.S. National Index posted a 2.1% month-over-month increase in April, while the 10-City and 20-City Composites posted increases of 2.2% and 2.3%, respectively. After seasonal adjustment, the U.S. National Index posted a month-over-month increase of 1.5%, and the 10-City and 20-City Composites both posted increases of 1.8%. In April, all 20 cities reported increases before and after seasonal adjustments. ANALYSIS “April 2022 showed initial (although inconsistent) signs of a deceleration in the growth rate of U.S. home prices,” says Craig J. Lazzara, Managing Director at S&P DJI. “The National Composite Index rose by 20.4% for the 12 months ended April 2022; this represents a slight deceleration from March’s 20.6% reading. The 10- and 20-City Composites were up 19.7% and 21.2%, respectively, modestly ahead of their gains in March. Despite the deceleration of the National Composite and the modest acceleration for the 10- and 20-City Composites, these growth rates are extremely strong by historical standards – at or above the 99th percentile in all three cases. “We continue to observe very broad strength in the housing market, as all 20 cities notched double-digit price increases for the 12 months ended in April. April’s price increase ranked in the top quintile of historical experience for every city, and in the top decile for 19 of them. In contrast with the past five months, when prices in most cities accelerated, in April only nine cities saw prices rise faster than they had done in March. There’s a regional pattern among the nine, as all five cities in our South composite (Atlanta, Charlotte, Dallas, Miami, and Tampa) are represented there. “Tampa (+35.8%) was the fastest growing city for the second consecutive month, with Miami (+33.3%) and long-time leader Phoenix (+31.3%) in second and third positions. Prices were strongest in the South (+30.6%) and Southeast (+30.5%). Even the comparatively weak Midwest (+13.8%) and Northeast (+14.0%) showed double-digit gains. “We noted last month that mortgage financing has become more expensive as the Federal Reserve ratchets up interest rates, a process that had only just begun when April data were gathered. A more-challenging macroeconomic environment may not support extraordinary home price growth for much longer.” For more information about S&P Dow Jones Indices, please visit https://www.spglobal.com/spdji/en/.