Sam Sadat 20/2

20/2 TWENTY CHECKS IN TWO YEARS

The Fastest Formula to Financial Freedom Using Buy and Hold Real Estate

SAM SADAT 20/2

CONTENTS

How I Came Up With The 20/2 Program Introduction Fix & Flip Matrix Buy & Hold Matrix Cash Now, Cash Flow, Cash Later Cash Flow Vs. Net Worth What Is The 20/2 Plan? You Don’t Need Banks! Your First Deal So How Do I Get There? Step 1: Buy It The 1% Rule Where Do I Find Investment Properties? How Do I Find Investment Properties? How Much Should I Offer? Making The Offer Due Diligence Period Closing The Purchase Escrow Step 2: Rehab It Step 3: Stabilize The Rent Step 4: Refi Step 5: Hold The Rule Of 72 Sam’s Insights: Food For Thought “What We Can Be, We Must Be” Be Real With Yourself Is Confusion A Bad Thing? Expectations Lead To Disappointment Trust In The Power Of Pursuit Common Sense Won’t Help You Succeed Suspend Disbelief - Act As It Success Is For Certain Nothing Stays The Same Conclusion Glossary Resource Center Sam Sadat Acknowledgments

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CONGRATULATIONS!

Welcome to my 20/2: 20 CHECKS IN 2 YEARS PROGRAM!

The 20 CHECKS IN 2 YEARS PROGRAM is all about holding small multi unit apartments long term for steady cashflow and imminent appreciation. History shows real estate fortunes are more easily made in down markets than in bull markets, as properties are for sale at bargain prices. I believe real estate prices have depreciated enough to be at or near the bottom. It’s always best to catch the curve at this point rather than on its way up. It’s much harder to get into the game when prices are going up and everyone is still fearful that the market may crash and burn once again. In other words, if the deal makes sense now you should pull the trigger!

The beauty of this program is that it doesn’t even matter if prices drop another 30%, which seems very doubtful. When you invest with the intention of holding long term on solid cashflowing properties you won’t lose. As I’ll show you later, by following my simple cashflow formula, your investments become bullet proof! With this manual and the accompanying videos, you will learn how to achieve financial freedom in 2 short years. By the way, if your lifestyle demands it, you could always go for 30 checks in 3 or 40 checks in 4 years, and so on.

So, here’s the million dollar question. Are you ready, willing and able to jump in and follow my program faithfully? You need not worry about the money part, as this program is specially designed to work in today’s depressed real estate market where bank mortgages can be hard to come by. If you have little or no money, I can supply you with the best training on how to use OPM (Other People’s Money) to finance your deals and achieve your ultimate objective.

Regards,

Sam Sadat

Disclaimer: Neither Sam Sadat nor this program makes any warranties or guarantees as to the success any individual may have with this program or mentorship training. The information provided herein is truth- ful and accurate to the best of our knowledge but no warranties or guarantees are made as to the absence of any errors or omissions in this text or any other learning materials associated with this program. Copyright © 2012 Sam Sadat

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HOW I CAME UP WITH THE 20/2 PROGRAM

I started my real estate club in 2003 and by 2008 our meetings were bringing in over 150 people every month. Everyone was euphoric, and with prices rising by the week, many thought California was immune to a crash. But when disaster struck, real estate investors got disillusioned and club attendance dwindled. There was widespread fear that real estate was dead as a viable investment option.

By mid 2009 everyone had fled the market. However, I noticed something. With prices falling off a cliff, profit margins were increasing. In fact they were great! I started my fix and flip strategy and it worked well through 2010 when competition heated up and the banks became less cooperative as they saw investors making money off their blunders.

During that period I looked hard at the market for multi family properties in the Los Angeles area, but they were still overpriced and would not cash flow. So I started buying 2 to 4 units in Riverside and San Bernardino, where properties were selling for less than their replacement value. My thought was that if I could not sell them as a fix and flip, I could keep them indefinitely because they would give me solid cash flow and massive ROI (Return On Invest- ment). One of my student investors and I had a lot of fun accumulating an inventory of 2-4’s in the Inland Empire.

Last year things began to change. Although there are good deals still to be found, the area was getting a lot of competition from other investors. Then things began to shift in Los Angeles. Multis were beginning to cash flow. I started to liquidate my Inland Empire holdings and focus my attention on properties that were much closer to home and I began participating in large apartment building syndications with affluent investors.

The crash turned out to be a great experience for me; after all, “that which does not kill us makes us stronger.” Out of it I formulated a series of rules and guidelines that helped me make better and quicker decisions on all kinds of multi unit properties in different locations.

That led me to refocus on my real mission: helping small investors buy and hold for financial independence. Even though it’s new, I know this system works because it has been tested in the most turbulent real estate market since the Great Depression. It has been tested in multiple communities, ur-

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ban and outlying. It works on duplexes as well as 20+ unit apartment buildings.

It took me a while to put it all together and develop this 20/2 Program and it now has all the components you need to reach your financial goals. We will show you where to get the properties, where to get the money and how to buy for long term hold.

So, now it’s up to you. If you are truly motivated you can use my program to achieve financial freedom for yourself in two short years. Remember, once a barrier is broken, anyone can follow suit and produce the same results. I’m here to tell you that we have broken the barrier and you can now step into our footprints!

Here’s how you can best use this program: Watch the videos first and then study the manual.

Look at it like this. Videos are like the classroom and the manual is like the text book. One has the real life information and the other is more formal in nature. They are designed to complement each other so that you get the best of both worlds in one awesome package!

Good luck,

Sam

Sam’s Food For Thought I have included many of my food for thought articles for your continued growth and development because a positive mindset is more important to your success than nuts and bolts. You can find numerous other Inspirational materials on www.samsadat.com.

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INTRODUCTION

Real estate, once the most stable and conservative road to wealth in America has been turned on its head.

Since the end of World War II millions of Americans have made the largest investment of their lives in their homes. It paid off handsomely for our parents and grandparents. Many of us well remember being told to buy a house, pay it off and either live there for free or sell it and buy a retirement home with the proceeds. It was a good, conservative idea – and it worked.

Home prices have advanced steadi- ly over the decades. The rising wealth of the middle class guaranteed a huge return on that home investment. And for those seeking entry into the middle class, it was a proven road to financial security. In addition to buying your own home, nearly anybody with ambition and a little cash could build a fortune by investing in real estate. It beat the stock market, retirement plans, and just about any other investment you can think of.

As we all know from the disastrous decisions made by our government, the unregulated greed of Wall Street, the deception of the Mega Banks – and unwise decisions of some homeowners - what worked in real estate a few years ago is not applicable any more. The implosion of the real estate market has pulled down the well meaning homeowners along with the overextended speculators. Everyone’s real estate values have plummeted, leading to enormous losses. The lucky ones, have just incurred a paper loss in market value, the unlucky ones have lost their homes, their equity and their good credit.

Now it’s a new ball game. Anything you thought was true about real estate is obsolete. The current market is dynamic – chaotic even – to the point that we all have to relearn the market and

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reinvent our investment strategies.

Most investors today are following one of two paths. They are Fix and Flip, and Buy and Hold. Both are viable strategies and we will explore both in this manual, but we believe that the best strategy for building wealth today is Buy and Hold, and we will explore step-by-step, how you can do it. But first, let’s look at Fix & Flip.

Sam Says: It Takes a Team! Every real estate investor will tell you that you cannot do it alone. It takes a team. You will need real estate agents, mortgage brokers, OPM (more on that later), a good lawyer, an accountant, appraisers, contractors, property managers and many others on your team.

Successful investors will also tell you that, above all, you cannot succeed without a good mentor. In fact, your success in any field of endeavor is predicated upon the quality of mentorship you receive.

If you wish to quickly increase and expand your investor education beyond our monthly meetings there is also our cost effective Power Mentor Program where we walk you step by step through the process of real estate wealth building.

This real life investing experience takes you out into the real world where you find, qualify, put an offer on, purchase, rehab and resell or hold your very own properties all under the supervision and guidance of our highly qualified investment staff.

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FIX & FLIP MATRIX

Go to any bookstore and you can find a shelf of books on how to fix and flip. For many years, its been a well known way to succeed in real estate investing. And in the period leading up to the real estate crash, encouraged by simplified reality television programs, many people, novices and experienced investors got in the game. When real estate prices were rising by the week, it was hard to go wrong.

In a fix and flip scenario, you buy a house in need of repair, rehab it quickly and sell it for a profit. This strategy is designed for a short term hold or what I often refer to as the Instant Gratification technique. It can put sub- stantial profits in your pocket if you do it right.

However, in today’s environment, investors can fall into traps and actually lose money. Why? Sam Says: The biggest trap is paying too much going into Always remember: You the deal. In real estate your profit is made when make your profit when you you buy not when you sell. Another common buy - not when you sell. If reason for failure is lack of training: overlook- you pay too much, or spend ing an expensive problem that must be repaired, too much on rehab, or failure to pull permits, attempting to FSBO (For over build for the neighbor- Sale By Owner), the list is a long one. Also lack hood, you will never see a of project management can doom your project: profit. Do your homework, Are you able to be on site every day for several run your numbers over and months? Can you afford to pay the overhead if over. Don’t let your emo- the rehab takes longer than expected or if the tions overwhelm you. The property doesn’t sell right away? Can you fire deal will either work or it a substandard worker, even if he’s your brother- in-law? won’t!

If you are buying a foreclosure or a short sale, you also need to know that banks are not fond of investors making profits - especially at their expense! So, they manipulate the sales price in such a way that savvy investors will back off, but the novices are enticed into thinking they’ve found the deal of a lifetime! Banks have also implemented other restrictions against flipping short sales which have virtually eliminated their use as a viable investment strategy.

So, after you have bought your fixer-upper, paid to have it rehabbed, paid the carrying charges for 4 to 6 months, and paid the broker her commission for

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selling the property, now you have to pay Uncle Sam - and I don’t mean me! If you hold the property for less than a year you will pay a hefty capital gains tax - and the paperwork will drive you crazy. That’s something they never mention on the TV shows.

Yes, there are investors doing fix and flips today. Some are making money, but all of them have lost money on some of their projects - usually their earlier projects. Can you afford the learning curve of losing money on the first one? Or the second one? Think carefully.

My friend Rob, is an experienced flipper working on his 5th flip in the last 12 months. I asked him how he was doing. He told me, “Well, I think I’m making money, but as soon as I sell one I have to dump that money into the rehab on the one I just bought. I never have any cash.” I’m sure in the end, Rob will do fine, but it can be a harrowing ride, and is not for the risk adverse.

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BUY & HOLD MATRIX

So, the Fix and Flip guy, if he plays his cards right, ends up with a bucket of cash when he sells a property. And I’m sure he, or she, savors the moment.

The Buy and Hold investor doesn’t get the bucket of cash - yet. What she does get is cash FOREVER!

Remember what I said about you make your profit when you buy? If you buy a property; a single family home, a duplex, a triplex, a quad or larger apartment building that cashflows, and by that I mean that the property pays you more money every month than it costs for you to hold it: That’s cashflow.

If you manage that property well by keep- PUT YOUR KIDS ing up with repairs, being responsive to THROUGH COLLEGE! your tenant’s needs and understanding Mrs. Ida Bell Morgan of Miami, the demographics of your renter pool, you Florida used the Buy & Hold real will make money, that is, you will receive estate method to put nine chil- checks, FOREVER! dren through college. Having nothing more than her husband’s In fact, the longer you hold the property income as a railroad worker, and the more money you make. As you pay her Scottish thrift, she bought in- down the mortgage, in addition to your come properties and each time monthly cash flow, you will gain equity and one of her nine children gradu- eventually own the property free and clear. ated from high school, she sold No broker fees, no capital gains. When a building which financed 4 years and if you do eventually sell, you will get a of college for that child. Perhaps check that dwarfs what flippers get. And the most surprising thing about without the stress! her story is that she did this during the 1930’s, in the depth of the This strategy lies at the heart of my 20/2 Great Depression. program which will be your formula for achieving financial freedom. In this strategy, you will learn how to acquire 20 units of residential real estate in two years. These units could be in any com- bination: five fourplexes, seven triplexes, 10 duplexes, or 20 houses. What’s important is that at the end of 2 years you will collect 20 rental checks every month. To keep things simple, we suggest you start by purchasing a single family home or a duplex, triplex or quad. You can continue this strategy or expand into larger apartment buildings as your knowledge and experience grows.

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CASH NOW, CASH FLOW, CASH LATER

But wait there’s more! I’ve already shown you how Buy and Hold gives you cash flow and cash later. It can also give you cash now! To my knowledge this is the only program that effectively combines all three MIND GAMES! cash components of real estate into one pow- A buy and hold investor I erful punch! know, looks at it this way. If he wants to up his life style or By incorporating this Hybrid Option into my maybe just needs better health 20/2 Program you can now enjoy all three insurance. He buys an income streams of income on your way to the top. property whose cash flow will You create stable cashflow from the rents cover that new payment. He generate from your portfolio. You pocket calls the new property the chunks of cash later when you eventually sell “health insurance building” or way down the line. You can also get cash the “new car building.” Maybe now by refinancing, 1031 exchanging a prop- its just a mind game, but it erty, or selling. You use the hybrid option for works for him. getting rid of less desirable properties and raising more cash for further investing.

Some investors believe you should never sell, and if you need money just refinance to get a new loan. Remember borrowed money against your real estate is not taxable income, which is in fact a great way to buy even more without paying any taxes! I do suggest consulting your CPA for your specific set of tax circumstances.

CASH FLOW VS. NET WORTH

We all know what net worth is: assets minus liabilities.

Undoubtably, building a large net worth is an important factor in creating your financial independence. But focusing on net worth is by no means the only way, or even the best way to achieve it. In fact, you could own a million dollars of Apple stock, but over the last 17 years, guess what your cash flow

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would be: ZERO! Steve Jobs didn’t like to pay dividends.

Since we cannot assume values in the stock market or real estate will be going up any time soon, our primary focus here will be to reach financial freedom via cashflow - by using rental properties as our cashflow making machine. Needless to say your net worth will be going up over the years as the market eventually rebounds, inflation takes hold, and your loan balances dwindle.

In today’s hard hit real estate market it’s easier than ever to create cash flow almost anywhere in the country. And I mean anywhere. In fact, your rate of return could be a lot higher in places like Arizona, Nevada or even Michigan, than it is locally. But your acres of diamonds are almost always found in your own backyard!

Remember: location is still the name of the game in real estate. Some hard hit areas may never recover - or recover very slowly. If that happens, and you have a cashflowing property, you will be OK. But if instead you bought in an area that could expect to recover more quickly, then that appreciation in value and rising rents will build your net worth faster than stable cash flow alone. There are a lot of factors that can account for that appreciation, and it takes careful study to identify locations that are depressed now, but can expect a quicker than average recovery.

In California, where the cashflow game was all but forgotten, we once again see an incredible opportunity for buy and hold investors. Remember that the main reason properties are lost to foreclosure is negative cash flow. We can help you find those emerging real estate markets that produce positive cashflow and will more quickly appreciate to increase your net worth.

Let’s get started...

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WHAT IS THE 20/2 PLAN?

It simply means, within two years you will buy and hold, and become the proud owner of 20 units of residential income real estate. In some communities it may take a few more units, in some a few less. But this strategy works regardless of where you live in the good old U.S. of A. SAM’S NO MONEY DOWN STRATEGY! You can start with a single family home, a No money down! It’s a phrase duplex, a triplex or what ever your comfort level is. Bear in mind, it might be often heard from real estate gurus, easier to manage 5 quads than 20 Sin- and if you look closely, the strategy gle Family Homes (SFH). But there are behind these claims range from management companies that can take convoluted to impossible. Subject care of that for you. Two years should Tos, Lease/Options and NINJA (no be enough time to complete the neces- income-no job-no asset) loans have sary transactions - especially when your crashed and burned with the real income rises after each purchase. estate market.

The most important thing to remem- What makes my plan different is ber is the rental income must give you that it involves a new breed of no a solid cashflow. You will find that the money down strategies that are ap- better locations generate lower cashflow plicable to this market where many because the higher price means a larger loan that will then eat up more of your people have lots of liquid cash on cashflow. A unit that cost $100,000 a hand but earning next to nothing door will not necessary rent for twice that on their savings. The typical rate of of a $50,000 unit. In our mentoring pro- return at your local friendly bank is grams, we will help you to find the best 1% or less! These are the collec- areas where there is a good balance be- tive of OPM (Other People’s Money) tween location (not too pricey) and cash lenders you need to pull off your flow (rents aren’t too low). plan of owning 20 in 2 years. And I In SoCal, we buy in areas where the will show you where to find them. average positive cash flow is between $400-$600 per unit. Therefore your 20 units will generate between $8,000 and $12,000 per month - remember cash flow is what you put in your pocket after all your expenses are paid! That’s from $96,000 to $144,000 per year! And, as time goes by, it will only get better as you stabilize the rents, Refi- nance (ReFi) for lower interest rates and build equity. From here on out, all

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you need do is to manage your portfolio effectively and you will have reached financial freedom. You are now free to move about the country...or the world for that matter.

YOU DON’T NEED BANKS!

Luckily, with my 20/2 program, you don’t need the bank’s money any more. I can show you how to find and getOPM to finance your deals. That’sOther People’s Money. OPM comes in two major categories: Hard Money (HM) and Private Money (PM). I will also show you how to refinance later with a conventional, lower interest rate bank loan. HOW SAM WILL HELP Hard Money lenders are in the business By now you know that investors rely on of lending money. They are almost like OPM – Other People’s Money – that private banks and they will always take comes from 2 sources: Private Money the first mortgage or the senior posi- and Hard Money. tion. Hard Money charges high rates and points (one point equals 1% of the Sam will show you how to raise private loan amount). These loans are avail- money and where to get the best hard able from various companies at 10- money loans. He’ll also assist you in 12% plus 2-4 points. Typically, a HM finding the lenders that can serve as a lender will loan between 65 and 80% of bridge between your hard money and ultimate bank refinance money. the purchase price or the After Repair Value (ARV). These loans are expen- When the time comes to get that sive, but they can make your deal hap- conventional bank loan, he’ll guide you pen, so refi at your earliest opportunity. to his miracle team of professional loan officers to complete the last step to Private Money usually comes from an your ultimate goal of getting the best individual. His rates will be lower than loan possible. a HM loan, or he may want a piece of the deal. Typically these loans are used for your down payment and possibly rehab costs. The money from this source is fully secured by a second mortgage or a junior loan. Self directed IRA’s, equity in other investment properties, business or corporate lines of credit, credit cards, or other personal assets are all examples of money sources you could tap into. An individual who has money parked in a bank CD earning 1% might well be very interested in

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earning a much higher rate in a secured real estate investment. The PM interest rate is based on what you agree to with the private lender, usually 8-10% or simply a share of the profits. Again, you can offer what makes the best sense to both of you -- a win-win scenario.

Later when these loans are seasoned – like after 3-6 months -- and have a satisfactory payment record – you will refinance with a bank for a lower rate.

YOUR FIRST DEAL

Here’s a quick example of an actual property you can invest in right now. We have a triplex in San Bernardino, CA that is for sale at $130,000. It’s fully rented and rents on all three units total $2100 per month. This property could bring in $2400 per month with Section 8 tenants.

Here’s how you structure this deal as your very first investment property, if you have no money of your own.

You’ll get an $85,000 first mortgage at 12% from a Hard Money lender and $45,000 second mortgage at 8-10% from a Private Money source. Your monthly mortgage payments are $850 and $375 respectively. It is important to know that you could finance or fund the entire purchase using Private Money and forget Hard Money altogether. Why would someone loan you $45K in the second position? Because he’s getting 0 to 1% at his bank and your property still has 10 to 20%+ equity left due to your masterful acquisition strategy! We’ve done many of these and know they work because private money lenders are desperate for cash flow, especially when it’s secured by real estate.

Here are your other monthly expenses:

$120 for property taxes, $50 for insurance, and $200 in maintenance. Your total monthly expenses are $1,595 and your net cash flow is between $505 and $805 depending on your type of tenancy. The good news is that once you refinance into lower rates, like 8% and get a first loan of around $130,000 in a year or less, you’ll reduce your mortgage payments from $1,225 to around $860 thus giving you an additional savings of $365 monthly and increasing

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your net cashflow between approximately $870 to almost $1170! And this is just from one triplex. Buy six more of these properties and you’ll have approximately $8000 per month in net cash flow income. Remember this is a 100% financed transaction.

If you have got some skin in the game, your cash flow will be even higher. But remember when you have no money in a deal your rate of return is infinite.

SAM SAYS: DO YOU HAVE A STRONG DESIRE TO SUCCEED? If so, how do you turn that desire into results?

Changing your life can be difficult. If you don’t like where you are in life, it can be very beneficial to examine your thoughts and beliefs, because your success in the future depends on your attitude and thoughts today.

Your thoughts come from your belief system that has been instilled in you from child- hood and reinforced by your life experiences. Maybe you believe to be rich, you would have to cheat or exploit the less fortunate. That belief system tells you that you would also have to cheat to be wealthy. How can you ever expect to succeed with ideas like that? While it’s true, some people do take an unethical path to wealth – many don’t.

But what’s important here is an unexamined belief system that may be holding you back.

Your belief system about virtually anything automatically orders you how to think about that thing. These beliefs may come from television, movies, friends or family. If these beliefs are in conflict with something you really want to do, you must examine them carefully: Is this something you really believe or have you heard these beliefs voiced, but never examined them for yourself.

Your thoughts take orders from your belief system, not from you! Change your belief system and your thoughts will change on their own accord and so will your life.

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SO HOW DO I GET THERE?

Just remember a journey of 1,000 miles begins with a single step. This two year journey takes only five!

1. Buy it. 2. Rehab it (if necessary). 3. Stabilize the rents. 4. Refinance for better terms. 5. Hold for steady cash flow and long term appreciation.

The next section will walk you through it...

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STEP 1: BUY IT

THE 1% RULE

This is your cashflow formula, the simplest way for you to immediately tell if you are looking at a possible deal. The monthly rentals must be at least 1% of the purchase price plus your closing and rehab costs. For example, if you paid $130,000 for a triplex in Riverside and invested another $20K in rehab and closing costs, the total monthly rents paid by the tenants should be no less than $1,500.00.

$150,000 x 1% = $1,500.00

The reason so many people lost their investment properties in the past few years was their total disregard of this valuable formula. The price of apartment buildings shot up along with the rest of the real estate market. Howev- er, rents did not. Buildings that were generating good cashflow dropped into negative territory as the carrying charges due to new loans soared without a corresponding increase in rents.

Even in today’s depressed market, many single family homes and multi units in expensive markets do not meet, let alone exceed, the 1% formula. That’s why this simple formula is so valuable. You can quickly judge whether a property is worth further research to determine if it is actually a viable deal.

As an example, all of our 2-4 units on the outskirts of Los Angeles, such as Palmdale/Lancaster or Riverside/San Bernardino well exceed the 1% rule. The triplex cited above is an actual property that’s producing over $2,200 in monthly rentals. The ROI calculations I have performed in multiple properties indicate anywhere between 3-13% return on your investment depending on the financing.

The 1% rule is the least you would want to get. Ideally you should be looking for 1.4% or better, especially if you finance with HM and/or PM. The 1% rule works best for an all cash deal or with today’s conventional financing rates. Also note property tax rates and insurance premiums may be higher in other states which may affect your ROI. My calculations are based on SoCal properties.

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If you buy all cash, you’ll get around 4.5% ROI. A 50% conventional loan would give you a 10% ROI. Here’s the best part; even if you borrowed hard money at 12% and 75% of Loan to Value (LTV), you would still get 3% ROI! Just refi at a lower rate at the earliest time (3 to 6 months) and watch your ROI will jump to 6%. All these ROI’s do not include depreciation write offs or future equity buildup which will contribute significantly to your ultimate return.

WHERE DO I FIND INVESTMENT PROPERTIES?

First, look around where you live. Check out the single family residences and small multis that are on the market. Can you at least apply the 1% rule? If so, you’re in luck! You most likely know the area pretty well and can judge what kind of neighborhood the property is in and what kind of person is likely to rent there. For instance is it near a school, a hospital, a prison, or a major highway? This will tell you something about the demographics of your renter pool.

If your town doesn’t qualify, start looking farther from the city center toward more rural or “infill” areas as they are known. This is where growth is expected to happen as the vacant land is filled in. Try to stay within one hundred miles from home. You are going to be going there a lot in the beginning as you get to know the area. In fact, you will become an expert on values there.

We like urban! In today’s environment, urban properties are also cashflowing well and easy to rent. People are moving back to the cities and vacancy rates in the outlying areas are going up somewhat. Away from cities, you may want a percentage that is closer to 1.5 instead of the normal 1% to allow for longer vacancy periods.

HOW DO I FIND INVESTMENT PROPERTIES?

The good news is that I can bring you an inventory of prospective deals if you are in my Power Mentoring Program. Whether you want SFR’s for fix and flips or 2-4 units as recommended by this program, I have access to

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wholesale sources such as other investors, asset managers REO agents and so on, designed to complement your training.

I’ll also teach how you can locate your own properties to supplement what we offer you. Your potential property sources are REO agents, for sale by owners (FSBO’s), short sales, asset managers, distressed homeowners, and pre-foreclosures. But most importantly you must network. In fact, networking is so vital to your success that I would go so far as to say that if you are not networking you are not working! The best and most profitable deals that I have done were the result of my networking activities.

HOW MUCH SHOULD I OFFER?

Even when you buy a property for long term hold, it’s still important to know the After Repair Value (ARV) as well as the monthly rentals. Otherwise, how would you know how much to offer?

To arrive at an offering price you need a standardized system for accurately determining the ARV. It’s so much easier and more cost effective to consult those who have been there and done that, than a trial and error approach. But few are smart enough to come to proactive mentors like me to learn the ropes the right way and thereby eliminate a costly learning curve.

I have created proprietary spreadsheets, based on a detailed analysis of transactions consummated over the last 18 months, that will help you get the answers you need within a few minutes. For Fix and Flips, you’ll get to know your ARV, rehab cost, and the “as is” value to determine your purchase price.

For our Buy and Hold properties spreadsheet, I’ve add- ed other components like

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monthly rentals at various percentages and their respective Return On In- vestment (ROI), and so on. With the right purchase price, you will come out ahead, even if you decide to use the Hybrid System and sell at any given time.

To learn more about it, join my Basic Mentoring Program which is available as a combo package with this program. To make things easier for you, my Price is Right webinar, which teaches you what ARV calculations are and how to figure the right offer price for the property, are included with this training program.

MAKING THE OFFER

Once you have arrived at a price using my system, you make your offer. Be sure to leave room for negotiation, but always have a strike price in mind. That’s the highest price you will pay and never be swayed by the emotion of the moment to go over it. Another thing to remember is that list prices of REO’s are 10-20% higher than sales prices. This means you never pay full price unless its a buy and hold and its monthly rentals are at least 1.5%.

Your offer should also be subject to physical inspection. And that means inspection of all units. You cannot assume just because Unit A is pristine, Unit B is also. You can also make your offer contingent on obtaining financing but don’t count on it. Proof of funds is a key element to your success in property acquisition. If you don’t have one, contact me for your options.

Of course, have your real estate agent/attorney/or expert friend to help you review and approve your offer letter.

DUE DILIGENCE PERIOD

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Once your offer is accepted, there will be a due diligence period, usually 2 weeks. You will now have the property inspected by a licensed real estate inspector and the seller will provide you with all the paperwork relating to the property. In distress situations, there may not be any paperwork as you are buying it as is, so your due diligence is very important. That’s why having a Mastermind Team is such a valuable commodity to you. Start your due diligence immediately. It will show the seller you are serious and you never know what kind of delays may occur.

Taking lots pictures, before and after is a must. This way you will be able to sell, refi or verify improvements have been made to he property. Good pictures could also make your contractors give you a more accurate estimate.

SAM SAYS: Rental Market Set to Explode According to John Burns Real Estate Consulting, the rental housing boom is set to explode!

Rental households comprise 34% of the housing stock, and are growing at the incredible rate of 1.6 million per year, while owned households are actually declining in number. This is an incredible surge in demand.

In our summary of the U.S. housing market, only 20% of renters live in large buildings (20+ units), and the remaining 80% of renters live in alternative types of housing. Approximately 55% of new renters are renting single-family homes, while 45% are renting apartments. The single-family rental business, which is already larger than the institutional quality apartment business, is booming. Unprecedented levels of distressed home sales, at home price/rent ratios that are the lowest in decades, is driving the boom.

Eventually, most of these renters will become homeowners. In the meantime, smart real estate investors will take advan- tage of the temporary disconnect in the market.

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CLOSING THE PURCHASE ESCROW

Acquisition or purchase escrow is actually the phase one of your closing. De- pending on your state, be sure that your real estate attorney reviews all documents, and your closing officer or escrow agent explains everything in detail.

If you plan to do a fix and flip, be sure to get a title binder. This way you can save a ton of money on title insurance when you sell it. Remember to use the same title company on your sale escrow.

If you’re financing your purchase with either conventional or hard money, carefully review your Estimated Closing Statement (HUD1) to be sure you’re not being overcharged. You have the right to preview your HUD1 a couple of days before the actual closing takes place. And of course you need to read over the promissory note to verify terms of the loan that you were given. Pay special attention to things like rate, term and any prepayment penalty.

Ask for an extension option just in case you need more time. This way, you don’t pay thousands of dollars more for a new loan. Most hard money loans are from 6 months to 3 years. Some companies with lower Loan to Value (LTV) conditions can give you longer terms. This could be a great option for you if you think you may have to hang onto the property for a longer time. A three year hard money loan can same you thousands.

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STEP 2: REHAB IT

Rent ready rehab is always cheaper and less time consuming than rehabbing for sale to an end user. As a rule we spend no more that $5K per rental unit. If you do rehab, a crucial part of it is finding the right contractor.

Find out if the contractor is licensed and bonded. Verify that his paperwork is up to date. Be sure to ask for references and call those references. Visit the work sites of current jobs and visit completed jobs. If the contractor is on the up and up, there should be not problems with this - if there is, walk away.

You need to get at least three bids. All things being equal you pick the middle bid. Trust your intuition if you have an uncomfortable feeling in the pit of your stomach or if you feel uneasy around them - don’t use them.

Another thing you need to do is to sepa- rate labor cost from materials. Be sure to pay for materials yourself to avoid possible mechanic’s liens. Stay on top of the construction crew to make sure the work is being done professionally. Always pay as you go when each task is completed. Offer incentives and bonuses for the early completion of the project. You could also assess penalties for delays.

Be there every day! Even if its only for a few hours or minutes. If you can’t be there, have someone you trust implicitly give you daily reports.

Be a responsible landlord not a slumlord. Create decent living conditions for your tenants and you get to keep them long term. During your rehab, be sure to make your property Section 8 compliant, it will increase your potential renter pool and your monthly cash flow.

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STEP 3: STABILIZE THE RENT

When evaluating your tenants, don’t ever be fooled by wads of cash offered as a way to make up for bad credit or a dubious track record. This type of tenant will always go bad on you and leave your property trashed. Qualify your tenants professionally using rental agreements, applications and back- ground checks.

Join the Association of Landlords SAM SAYS: Win – Win - Win to receive many valuable services including credit checks. It’s been Bear in mind that while you’re on your jour- my experience that one’s credit ney toward financial freedom, you’re also score speaks volumes about one’s doing something great for your community. sense of financial responsibility. In short, you can seldom go wrong You are creating jobs, helping the economy, with a credit worthy person. improving neighborhoods, and making better living conditions for your tenants. The Keep in mind that you can also community wins, your investors prosper and lease option your property as an you create wealth for yourself. alternative to renting. But it’s important you do it with full knowl- Everyone wins. edge of the specifics of this strategy and applicable laws. Obviously, we can help you with this strategy should you choose to follow it. Some advantages of the lease option are no management headaches or fees, higher up front cash in your pocket and sub- stantial savings in real estate commissions when you finally sell it.

During your period of rent stabilization, you will bring rents up to market levels based on your rehab or just cosmetic improvements. Section 8 could give you 10-20% higher rents and more stable tenancy. Marketing efforts will fill empty units. This will provide you with increased equity when you go to Step 4 and refi.

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STEP 4: REFI

Generally 3 to 6 months into your project, your units are rented, and the property as a whole looks fresh and tidy. You have good happy tenants and you are documenting your income and expenses.

Now your loans are seasoned and you are ready to refinance. This is important because you are paying high interest rates and you will make more money when you bring those rates down. So you go the bank to get a conventional 15 or 30 year mortgage. If you are approved, great - several hundred more dollars a month will go into your pocket. If you are turned down and you have shopped at several banks, there is another alternative -- you can get a bridge loan or mid level financing from many money sources that are popping up all over the place these days. This will bring your payments down somewhat, but will bridge the gap between your hard money loan and the conventional loan you will eventually get.

This is a fairly esoteric part of the business, but don’t worry, I can help you with it. We can provide you with money sources along the way any time you ask for them. Many are listed in this at the end of this manual.

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STEP 5: HOLD

Up until now we have covered in some detail how to buy your multi units. Of course the other important part of Buy and Hold is the “Hold” part. In some ways, its easy. The property is cash flowing, you’re keeping up with maintenance, and since you have 20 or more units, a management company is handling the day to day headaches. So you manage the managers and you try to look at the big picture: Is the neighborhood going up or down? How’s the local economy? What will things look like in 3 years? In 5? Or 10?

In the boom days of real estate when investors had total disregard for cash flow, hiring a management company was another burden on trying to break even. Buying overpriced to begin with, these properties started hemorrhag- ing money. In today’s market, the way we teach you to buy, your cashflow properties could well afford to hire a professional management company and not lose money or sleep over it. But his doesn’t mean you couldn’t or shouldn’t manage your own properties.

If you plan to self manage, you may not want to tell your tenants you are also the owner. You’re simply the manager - the good guy. Any time you need to reject something, owner is the bad guy.

Several years down the road, you will have some serious equity built up. If you refied with 15 year mortgages, you soon will own your property free and clear and your income will soar.

Don’t let that equity burn a hole in your pocket! Don’t make the mistake homeowners did a few years ago and pull that equity out and spend it frivo- lously. Do pull it out to invest in other properties or to diversify into other types of investments. Or use it to put a few kids through college. Let me help you with my Hybrid Plan, if you decide to go that route.

If you do decide to sell, you can pull out equity and defer some taxes by en- tering into a 1031 exchange with another property. Talk to your accountant before embarking on such a venture.

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THE RULE OF 72

One way to judge the effectiveness of your investments is to employ the Rule of 72. If you divide your return on investment by 72, the result is the number of years it will take to double your money. For instance, if your money is parked in a certificate of deposit at the bank, your interest rate is about 1%. If you divide that by 72 you will learn that your money will double in 72 years - your great-grandchildren will be overjoyed! The average return for the last 5 years in the stock market is 2.3% - no joy there either.

THE RULE OF 72 THE TIME IT TAKES TO DOUBLE YOUR MONEY % RETURN NO. OF YEARS 1 72 2.3 31 5 14.4 8 9 10 7.2 20 3.6

Let’s say we get you into a triplex with a 10% Return On Investment. In this case 72 divided by 10 would give you 7.2 years to double your money. Not bad! However, it is entirely possible to get a ROI of 20% by holding multifamily units. That’s doubling your money in less than 4 years.

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SAM’S INSIGHTS: FOOD FOR THOUGHT

“WHAT WE CAN BE, WE MUST BE”

This is one of many famous quotes from Dr. Abraham Maslow, the father of Humanistic Psychology, who is renowned for his Hierarchy of Needs and Self Actualization theories. Most of his writings are about personality and human motivation. Today, his teachings are successfully applied in fields of business, marketing and communication, among others.

“If you deliberately plan on being less than what you are capable of being then I warn you, you will be very unhappy for the rest of your life.” - Abraham Maslow

Though Dr. Maslow believes human beings have an instinct that drives them to be the best they can be, he says that the story of the human race is the story of men and women selling themselves short.

So how does this happen? To understand you have to begin by imagin- ing a straight line that reaches toward infinity in both directions. Now think of yourself standing in the middle of this line, on a point we will call point zero. One side of the line starts with plus 1, plus 2, plus 3 and so on to plus infinity. On the other side of the line, you have negative 1, negative 2, negative 3 and so on to negative infinity.

Dr. Maslow states that at any given moment, when you are faced with making a decision, you have a choice to move forward in the direction of growth (the plus side of the line) or step back into the direction of safety or comfort (the negative side of the line), which is on the negative side of the line.

What do most people do when con-

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fronted with problems of life? They usually make the decision to step back into the safety of the negative territory. They step back negative 1. Often they justify this step back by saying, “It’s nothing - I just went back one step. I can always make up for it later.” What most people fail to realize, however, is that when they take one step back they also give up the opportunity to take a step forward. So in this sense one step back takes two forward steps to recover!

Therefore, when you make decisions for comfort or safety you quickly fall behind your potential. Every time you make such decisions, the gap between what you could have done and what you actually did grows wider. Dr. Maslow believes that all our regrets, anxiety, frustrations, unhappiness, anger, depression, etc. lies in that gap which separates growth from comfort or realizing one’s full potential from settling for less (selling oneself short.)

I’ll give you a few examples of how people choose safety over growth 1. You got angry at your son and decided to break off communication a while back. An opportunity arises to sit down and talk things over, but you take the easy way out by going into your comfort zone and watch the ball game. 2. You need to get up early and take care of something important. Instead, you look at the clock and go back to sleep! 3. You find a good property to invest in but at the last minute you’re gripped by fear and chicken out!

Many people make choices in the negative direction of safety and comfort because they believe that it will bring them security. But is there really such a thing as security in this world? If you really think about it, it becomes clear that “security” is a myth. We have very little control over the major events in our life. The fact is, we could even die at any moment. Some schools of thoughts say that the only way to achieve “security” is to find comfort with the inher- ently insecure nature of existence. By that, they mean to simply allow things to take their natural course. That does not mean you sit back and do nothing, but that you do the best you can without getting attached to the results. Only then can you experience a life of joy and fulfillment.

So, is there any hope of reversing this vicious cycle of making decisions that compromise your happiness in exchange for an illusory feeling of safety? The answer is yes! It’s absolutely possible, and you won’t need several lifetimes to get it done! It will require effort at the beginning, but it is the only way to solve the problems of your life.

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Understanding yourself is essential for transformation so first examine your own life and look at moments when you could’ve and should’ve gone for growth but instead chose safety. See how the gap where all this negative en- ergy resides is dragging you down. But avoid getting stuck in regret; instead use your understanding of past mistakes as motivation to change your approach in life. We can’t change the past, but we can take action in the present to affect the future.

Resolve never again to step back into safety when you can choose growth instead, and as you begin to make decisions that represent forward steps into growth rather than retreats into safety you will soon begin to feel you are gaining control of your life and moving in the direction of self-actualization. Only this, according to Maslow, will allow to realize your full potential and to maintain a happy, fulfilled state of being.

BE REAL WITH YOURSELF

As you may know, one of my life mentors is Ralph Waldo Emerson. I was reading one of his essays again when I came across this awesome excerpt. “The key to every man is his thought. Sturdy and defying though he look, he has a helm which he obeys, which is the idea after which all his facts are classified. He can only be reformed by showing him a new idea which com- mands his own. The life of man is a self-evolving circle, which, from a ring imperceptibly small, rushes on all sides outwards to new and larger circles, and that without end. The extent to which this generation of circles, wheel without wheel, will go, depends on the force or truth of the individual soul.”

Although his style of writing is somewhat impenetrable, it has great depth and carries profound messages. In this excerpt, he emphasizes the power of thought as being omnipotent. He also believes that man is a self evolving being that starts with small circles that can grow larger to all sides. It kind of reminds me of the Big Bang but on a much smaller scale, micro-cosmically as opposed to macro-cosmically. He also believes that if you change your thought the “facts” of your life will change accordingly.

But the most amazing statement is the last one. He tells us that the extent and power of these concentric circles of human evolution is directly propor- tional to truth of the individual soul. Wow! He says that if you wish to have a

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vast influence over your life, you need to be real with yourself or your soul to be in perfect harmony with your physical existence. The soul is here for its own joy. Can you dig that? Can you live your life with joy? Can you trust the process of life? If you answer yes to all these questions, then your circles of influence will grow wide and become eternal. And isn’t that the best legacy one could leave behind?

IS CONFUSION A BAD THING?

Are you confused? Congratulations! You can find your way to clarity, but not before you work your way through the confusion. This sounds paradoxical but it’s true. In fact, when Socrates was asked how he had found the light he answered, “through darkness.”

As a real estate mentor and personal coach, I get to meet many people every week and talk to some at a profound level about all types of challenges they face. Here is what I find to be true across the board.

1. You are not the only one having problems. 2. Everyone has their fair share of adversity. 3. Often, other people’s problems are much larger than yours. 4. The only way to overcome problems is by facing them. 5. You’re better off keeping your own problems rather than trading them. 6. Confusion is not bad; it’s the starting point to clarity.

One of the most important universal laws is the law of duality. Many great masters throughout history have pointed out that life is a constant battle between dichotomies. In fact, this so called “battle” is why life is so mysterious and what makes it so exciting. Our job seems to be one of a self examiner, trying to figure out where we are and how we can keep our balance between the opposite poles. Going to the extremes of “pain and pleasure”, “success and failure”, “light and dark”, “abundance and scarcity”, “happiness and sad- ness”, “love and hate” and so on, will deprive you of the real taste of life. You see, life only makes sense when one pole is compared with the other, or when you have profoundly experienced both ends of the spectrum. For someone who knows only pain, it’ll take a long time before they can feel pleasure.

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Now, do you know why I congratulated you on your state of confusion? To me, it means that you are ready to experience clarity, to see things as they ap- pear to be because you saw the depth of confusion and didn’t like it. You’re through with confusion! Clearly, living in total clarity is a great thing when you know confusion and if you happen to forget how it felt or what it looked like, you’ll fall into confusion again!

How do you make sure we do not fall into confusion again? You do it by living a balanced life, never going to extremes on anything no matter how good it might feel to you at the moment. To me, balance is divine. Balance is what keeps things in order and gives meaning to your purpose in life. So, next time you hear a loved one say, I’m confused. What’s your answer? Definitely not sympathy. A simple congratulation would do the trick!

EXPECTATIONS LEAD TO DISAPPOINTMENT

Never have expectations from anyone or about anything. Expectations lead to disappointments and disappointments make your heart grow old!

Most of us are raised with the notion that expectations are natural and necessary. They are not. How does it feel when someone disappoints you? Do you not feel a little heart broken? Every time your heart breaks it grows a little older and fainter!

We’ve all seen people who regardless of their age seem quite broken down. What do you think caused that? Multiple cycles of expectations, disappointments and shattered hearts. Instead of expectations try allowing. When you allow things to flow and people to be, do and have what they wish, you are insuring your heart to remain intact.

TRUST IN THE POWER OF PURSUIT

You’ve dreamed many dreams that were yours for the taking. In fact, almost all of them were well within your reach. Even now, most of what you dream of can be yours.

The simple secret is the seeking. Pursuit! Dreams begin to crystallize into real-

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ity when they are pursued. The world behaves differently when you actually take action to go after what you want. What you wish “could be” starts becoming. The dream moves in your direction, begins to come to you, even as you reach for it.

Consider this - the dreams you have realized in life are those which you ac- tively sought. That which you have achieved is what you decided to go for in one way or another. You can “think positively” all day long, all year, but positive action is what counts.

Wishing, longing, wanting, desiring...these are not the same as pursuing a dream. These are mental states, and can play an important role in the process of becoming you to the power of two! But they are essentially passive. Pursuit, on the other hand, is active. Reaching for your dream is behaving- moving-and it shortens the distance between you and your desired objective.

Most people confuse wishing and wanting with pursuing. Their desire for a dream may be desperate and deep, but when that desire fails to produce, they conclude the dream cannot be theirs. Actually, the only proof they have is that the longing is not enough. The data at hand merely prove that desire alone does not-cannot-deliver.

Pursuit is what makes the difference. Reaching for what you want alters the odds immediately, and drastically, of getting it. “What you want” becomes part of a dynamic exchange, with the world and you in partnership, when you act and extend yourself toward the dream.

“The greater you” is firmly based on the premise of pursuit. Quantum leaps require you to take the offensive. You can’t achieve exponential gains in your success from a defensive posture. You cannot remain in a passive stance and make a quantum jump.

You must move on the dream. That means you must leave the cover, the safety, that goes with merely wishing for something. You must place your trust in action. Ask...seek...and knock...and the dream shall be yours.

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COMMON SENSE WON’T HELP YOU SUCCEED

Most of us can be found flying too close to the ground. Too often we don’t give ourselves permission to soar.

I believe it is time to start focusing on possibilities, rather than on limits and obstacles. Making a jump into higher levels of performance and success means moving outside your conventional mental boundaries. If you will rethink how you’re thinking, if you become more flexible and less rigid, you can multiply your performance potential. You must let your desires guide you, instead of allowing yourself to be boxed in by perceived constraints.

Achieving higher levels of prosperity means defying the boundary of the prob- able. It means achieving well beyond the obvious. So don’t limit your desires to what you think you “can have”...start going after what you “want.”

This means you must give yourself permission to dream, to risk. You must set yourself free. After all, freedom is the basis of life itself.

A ten or twenty percent improvement isn’t the idea at all. A little more, different or better isn’t what I’m talking about. That would represent only incre- mental gains. That might be an impressive performance in some situations, like if there were unusual obstacles or a very difficult set of circumstances. But while such a goal might be challenging, it would not represent a quantum leap. Instead of “an additional ten percent or so”, a quantum leap produces a dramatic and multiple gain, an exponential increase. Quantum leaps are by definition rather astounding, certainly unconventional.

I’m not saying that anything is possible. It may not be, certainly not in one lifetime. But in some areas of your life what is within your reach is enough to stagger the mind. You can double your level of success. Triple it. Far beyond that, you can leverage up your performance to the second, third or fourth power or beyond.

True, there are limits, but you don’t need to worry about them. Your real limits are far beyond your artificial mental boundaries. The real limits won’t box you in, but the false ones you’re carrying around in your mind are a self-imposed prison.

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So how do you break out of that jail? Through surrender. You have to give up some of your old beliefs and sacrifice some of those “sensible” thinking pat- terns. So-called common sense can be a curse that puts a ceiling on how far you reach or how high you fly.

The powerful you, the quantum leap thinking, is based on uncommon sense.

SUSPEND DISBELIEF - ACT AS IF SUCCESS IS FOR CERTAIN

Instead of holding back because you don’t have hard proof that you can make a quantum leap, see if you end up with evidence proving you can’t. Just make the jump – act as if your success is guaranteed – and then see which set of ideas you should believe in.

Your mind set for the moment may be flawed by doubt and skepticism. The idea of making a quantum leap in your performance, jumping from your present level of achievement to one several levels higher in one bold stroke, is an alien idea. You haven’t been trained to think that way. You may have definite reservations about the possibility that you can make such exponential improvement at all, particularly with less effort and in a very short period of time.

The experts generally agree that people typically use only about 10% of their true potential. If we accept that argument, and even if there were no other resources outside yourself that you could bring to bear on the situation, you still could do ten times as good as you’ve been doing.

Your skepticism, which you presume is based on rational thinking and objective assessment of factual data about yourself, is rooted in mental junk. Your thoughts are not the product of accurate thinking, but habitual thinking. Years ago you accepted flawed conclusions as correct, began to live your life as if those warped ideas about your potential were true, and ceased the bold experiment in living that brought you many breakthrough behaviors as a child. Now it’s time for you to find that faith you had in yourself before.

If you want to be skeptical of some ideas that truly deserve to be called into question, challenge the thoughts and beliefs that have argued against your

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taking a quantum leap. Put those old inhibiting ideas to test by going for it with everything you’ve got.

Do yourself a big favor and suspend disbelief for right now. You don’t have to be convinced that you can succeed in making a quantum leap, but don’t keep on believing those old ideas you’ve been carrying around about your personal limits. If it will make it easier, hold off for a while on believing anything.

Just act like you have complete faith. Merely do what you’d do if you knew you were going to succeed. Behave like you have that total conviction.

Doubt is what does the most damage. In the immortal words of Shakespeare, “your doubts are your traitors.” Meaning anytime you doubt yourself or your intention to succeed, you betray yourself and your life. Here’s what I suggest: Proceed boldly, as if it is completely inconceivable that you will experience anything other than a successful quantum leap. In short, if you must doubt anything, doubt your limits.

NOTHING STAYS THE SAME

Nothing ever stays the same. If you’re not going up, you’re certainly heading down!

If you’re not growing, you’re shrinking, if you’re not progressing, you’re re- gressing and if things are not getting better, they’re surely getting worse. Because change can be slow and steady, you may think status quo means stability but in reality it’s only an illusion.

One constant in life is change and ironically it’s the one component most people resist the most.

Here’s one secret to your success and happiness, embrace change with all your heart or you’ll suffer the consequences! What are those consequences? Try neurosis for starters. Most anxiety people experience stems from resis- tance to change. When you insist on seeing things as you wish instead of as they really are, you’re out of touch with reality. When you refuse to accept change in your life you stagnate and slowly deteriorate into a useless clump

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of matter!

I know it’s hard to accept change let alone make any in your own life, but what are your alternatives? Dinosaurs couldn’t change and went extinct but ants adapted and they’re still here. In this current mortgage crisis I noticed how so many mortgage brokers and agents vanished but a few who demonstrated flexibility are doing even better than before. I’d like to give you a quote from one of my favorite sages of all time, Loa-Tzu in his classic book, Tao Te Ch- ing dating back 2500 years ago.

“Men are born soft and supple; dead, they’re stiff and hard. Plants are born tender and plaint; dead, they’re brittle and dry. Thus whoever is stiff and in- flexible is a disciple of death. Whoever is soft and yielding is a disciple of life. The hard and stiff will be broken. The soft and supple will prevail.”

In order to accept change and make change, you need to be flexible in mind and body. Flexibility affirms greater life while stiffness accompanies death. If I could just give you just one piece of advice here is to practice flexibility. Allow your mind to accept new ideas, look at life with an open mind and stop being stubborn about your beliefs. The Universe we live in is a field of all possibilities and no one has all the right answers. Be a seeker and allow change to become a permanent part of your life and you’ll see how events would unfold in your favor. It’s almost as if the Universe is “conspiring” to make your dream come true!

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CONCLUSION

The information you have learned and will learn from my 20/2 Program is very rarely shared. Most people just don’t know about it, and those that do choose to keep it a secret or make it so complicated that no one gets it. But it is my goal to share as much as I can with you so your goal of financial independence is reached in the shortest time possible – two years!

I know one thing. Armed with knowledge and determination, anyone can reach great heights. But we, as a country, are so far in the red it’s hard sometimes to see how we can get back in the black. After all, how much of a difference will one family becoming financially independent actually make? Sure, they are rehabbing property, employing people, providing improved apartments, and yes, paying higher taxes, but it’s a drop in the bucket!

The way I see it, what we need are numbers.

Financial independence comes to freethinking men and women who have made sound decisions in all facets of their lives. Financial independence has the power to transform followers into leaders. Leaders who, using that same independent frame of mind will create their wealth, will run this country responsibly and for the betterment of all mankind.

I know these are lofty goals, but I have no doubt they can become a reality in my lifetime. So, let’s spread the word and get as many people as you know involved in our mission for financial freedom for all Americans!

The 20/2 Program is not a static system. It’s just as proactive on my end as it is on yours. Once you enroll into this program, you’ll be given your own username and password good for one year. You’ll have access to awesome dynamic content to keep you in tune with your goal of financial freedom. Here’s the best part, I’m sharing the wealth by allowing you to become an equity partner in our acquisitions! We find the 2-4 units, we qualify them, fix them and manage them. All you need to do is invest your money and collect your monthly checks. Of course, you can stay as active or passive as you wish. After all, you will learn from us so you can grow your own wings to fly!

Under our continuing education curriculum, after the first year you will be able to stay in touch with us as your source of knowledge and inspiration to help

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you achieve and maintain your financially free status for life.

Some of you may want more personal attention. If you happen to be one who works best while being held accountable, contact me by e-mail so we will create a tailor-made package of success for you! More savvy investors could consider our Power Mentoring Program designed to accelerate your progress up the ladder of prosperity.

My best wishes to you on your journey to total financial freedom.

Sam Sadat

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GLOSSARY

1031 Exchange. Otherwise known as a tax deferred exchange is a simple strategy and method for selling one property, that’s and then proceeding with an acquisition of another property within a specific time frame.

Acceleration. A clause in the loan documents that allows the lender to demand the full balance of the loan rather than just the amount that is past due.

After Repair Value. The expected fair market value a developed piece of real estate to fetch on the open market after it has been completely fixed up.

Amortization. Monthly payments of principal and interest over the term of the loan, so that at the end of the term the loan has been paid in full.

Anti-deficiency laws. State statutes providing that homeowners are not liable to the lender for any shortage between the balance of the loan and the proceeds received at the foreclosure auction.

Arrearage. The past due balance on the loan, including unpaid interest, principal, late charges, and attorney fees. Also known as “delinquency.”

Assignment. Where a party to a contract transfers his rights and obligations under the contract to a third party.

Assumption. A clause in a mortgage or deed of trust that requires the new owner of a house to become personally liable to the lender for the loan’s repayment.

Auction. The final step in a foreclosure process in which the house is sold at a public sale to the highest bidder. The person conducting the auction is called the “auctioneer.”

Automatic stay. Upon the filing of a petition in bankruptcy court, a federal injunction automatically arises which stops (stays) all debt collection actions, including foreclosure.

Balloon payment. The final lump-sum payment of principal due at the end of the term of a loan.

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Bankruptcy. A proceeding authorized by federal law and carried out in the federal courts, which provide debtors with various kinds of relief from their debts. Chapters 7, 11, 12, and 13 refer to different types of bankruptcies.

Beneficiary. The name of the lender in a deed of trust.

Bid. Oral offers to purchase a property submitted by potential purchasers during the foreclosure auction.

Bird-dogging. Finding real estate deals for other investors.

Bona fide purchaser for value (“BFP”). A purchaser of property who buys it without notice or knowledge that there may be a problem with title or possession.

Borrower. The person or entity that borrows money from the lender.

Bridge Loan. A short-term loan that is used until a person or company se- cures permanent financing or removes an existing obligation.

Cash Flow. The revenue that accrues from an investment after all expenses and interest payments are deducted.

C.L.U.E. Acronym for Comprehensive Loss Underwriting Exchange (“CLUE”), a national insurance claims database.

Collateral. Real or personal property pledged as security for repayment of a loan.

Complaint. The initial document filed by a plaintiff in the Court and served on the defendant(s), which commences a lawsuit.

Conforming loan. A loan that meets FNMA standards and guidelines. A lender can more readily sell a conforming loan because it meets these guidelines.

Conventional loans. A real estate loan, usually from a bank or mortgage company, that is not insured by the Federal Housing Agency or guaranteed

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by the Department of Veterans Affairs.

Conveyance. Transferring title of real property from one person to another by deed.

Cost Approach. The cost approach determines the value of a property by calculating how much it would cost to replace it.

Damages. Monetary compensation recovered in Court by a person who has suffered a loss or injury because of the unlawful acts or negligence of another.

Debtor. In the context of bankruptcy, the individual or legal entity that filed bankruptcy.

Deed. A document in which ownership of real property is conveyed from one party to another.

Deed in Lieu of Foreclosure. A deed in which the homeowner transfers title to the house to the foreclosing lender instead of (in lieu of) the lender continuing with the foreclosure.

Deed of trust. A three-party document in which the borrower (“trustor”) pledges his real property to a neutral third party (“trustee”) as security for repayment of the loan to the lender (“beneficiary”).

Default. Borrower’s failure to comply with the terms and conditions of the promissory note, mortgage, or deed of trust.

Defendant. The party against whom a lawsuit has been filed.

Deferred maintenance. Needed repairs and maintenance to a property because the homeowner can’t afford to.

Deficiency. The shortage between the balance of the unpaid loan and the proceeds received by the lender at the foreclosure auction.

Deficiency judgment. A judgment entered by a court against the borrower for the shortage between the balance of the unpaid loan and the proceeds

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received by the lender at the foreclosure auction.

Delinquency. The amount of mortgage payments, late fees, taxes, insurance, and other fees, that has not been paid by the borrower. Also known as “arrears.”

Dream team. A team of real estate professionals that you assemble to help you become a successful foreclosure investor.

Due diligence. In real estate jargon, due diligence refers to the investigation, research, and analysis of your investment. Due diligence is crucial when buying foreclosure properties because you need to do your homework.

Due-on-sale clause. A clause in the mortgage or deed of trust which allows the lender to demand immediate payment of the entire loan upon sale of the property.

Earnest Money Deposit. A good faith deposit that must accompany a purchase contract in order to make it enforceable.

Encumbrance. A lien recorded against real property, such as a deed of trust, mortgage, or judgment lien. Because it is a financial obligation, a lien is said to “burden” or “encumber” the property. When the property is sold or refinanced, the encumbrance must be paid off.

Equity. The homeowner’s interest in a property after deducting all outstand- ing liens from its current market value.

Equity purchase. This technique (also known as “cash for keys”) involves purchasing a house by paying the homeowner for their equity, while leaving the existing loan in place.

Equity purchaser. A person who purchases a house while it is in foreclosure, by paying a fee for the homeowner’s equity.

EPA. Acronym for the U.S. Environmental Protection Agency.

Equity Split. This technique involves buying a house, taking it out of foreclo-

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sure, fixing it up, and then re-selling it. The term “equity split” refers to you splitting the net proceeds from the sale (“equity”) with the homeowner.

Escrow. A neutral third party responsible for processing the documents and monies in a real estate sales transaction.

Estate. In a bankruptcy context, the term used to describe the assets and liabilities of the debtor.

Eviction. The legal procedure to have a tenant removed from a property when the tenant has breached the lease (also known as an “unlawful detainer” lawsuit).

Exit Strategy. Strategies used by investors when deciding what to do with properties they have purchased.

Fair market value. The price that a property would sell for in an open market between a willing buyer and a willing seller in an arms-length transaction. In a judicial foreclosure, a determination by the court as to the value of a property as of the date of the foreclosure auction.

Farm. A geographic region that an investor becomes intimately familiar with, and invests in.

FHA. Acronym for the Federal Housing Authority, a department of the U.S. Department of Housing and Urban Development.

Foreclosure. The procedure in which a property is sold at a public auction to pay off the defaulted loan. There are two types of foreclosure, judicial and non-judicial.

For Sale By Owner (“FSBO”). A homeowner who sells his home on his own rather than listing it with a real estate agent.

General contractor. A person licensed by the state to perform repairs and renovations to a property. General contractors generally hire and supervise sub-contractors and skilled workers who perform the actual construction.

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Guarantor. A person who becomes secondarily liable for another’s debt.

Hard Money. A specific type of asset-based loan financing through which a borrower receives funds secured by the value of a parcel of real estate. Hard money loans are typically issued by private investors or companies. Interest rates are typically higher than conventional commercial or residential property loans because of the higher risk taken by the lender.

HOA. Acronym for a homeowners association.

HUD-1. Acronym for the settlement statement issued to buyers and sellers at the closing of a real estate transaction.

Impounds. Payments to the lender (over and above the monthly payments of principal and interest), which are held by the lender and then used to make semi-annual insurance and tax payments.

Income Approach. The Income Approach estimates the value on a property based on its ability to generate rental income. This approach is commonly used for office buildings, commercial real estate, and multi-unit apartment buildings.

Interest. The cost of borrowing money. The interest rate is described in the note as a yearly percentage of the loan (“per annum”).

Judgment. A final decision by a court resolving a dispute between plaintiff(s) and defendant(s) in a lawsuit and determining the rights and obligations of the parties.

Judicial foreclosure. The lender’s forced sale of a borrower’s real property, handled through a court proceeding.

Junior lienholder. The holder of a mortgage or deed of trust that is subor- dinate to a senior lienholder (the junior lien was recorded subsequent to the senior lien).

Jurisdiction. The authority of the court to decide a lawsuit over real property and the parties. In a foreclosure context, the court in the county in which the

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property is located has jurisdiction to hear the lawsuit.

Lease. An agreement between the owner of the property (called “landlord” or “lessor”) and the person taking possession of the property (called “tenant” or “lessee”) for a specific period of time (months or years), in exchange for paying a specified amount of money (“rent”).

Lease Option. In a lease option, an investor rents a house for a fixed period. During this period, the investor has the option (but isn’t required) to buy the house for a specified price.

Lender. The entity that loans money. Referred to as the “beneficiary” in a deed of trust and “mortgagee” in a mortgage.

Levy. A seizure of real property by the sheriff for the purpose of conducting a foreclosure auction.

Lien. A document recorded in the county recorder’s office or courthouse indicating that real property is security for the repayment of a debt. Liens are either voluntary (such as mortgages and deeds of trust) or involuntary (such as mechanic’s liens, tax liens, and judgment liens).

Lienholder. The lender holding a lien recorded against real property. A lienholder is “senior” if it is the first lien recorded against a property. All other lienholders with subsequently recorded liens are said to be “junior” lienholders.

Lis Pendens. The Latin phrase for “Notice of Pending Action,” which is a document recorded in the county recorder’s office or courthouse warning that a lawsuit has been filed involving title and/or possession of real property.

Listing agreement. Written agreement between a homeowner and a real estate agent to sell the house at a certain price and terms in exchange for the agent receiving a commission when the property sells.

Loss Mitigation. This is the department within a lender’s office that handles short sales. The name refers to the lender’s efforts to mitigate their losses by short selling the house rather than foreclosing.

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Mechanic’s lien. A lien recorded in the county recorder’s office against the property by a contractor, sub-contractor, or supplier, when the homeowner failed to pay for work done to the property.

Mortgage. A two-party security document in which the homeowner (“mortgagor”) pledged real property as security for repayment of the loan to the lender (“mortgagee”).

Mortgage broker. A person who specializes in finding loan programs from various lenders throughout the country.

Mortgagee. The lender who receives the mortgage as security for repayment of the debt.

Mortgagor. The homeowner who pledged his property as security for repayment of the debt.

Negotiable. The legal right of a lender to sell a loan to a third party, who then has the right to collect the payments.

Net Operating Income (NOI). A company’s operating income after operating expenses are deducted, but before income taxes and interest are deducted

Non-judicial foreclosure. A procedure (without the involvement of the court), resulting in a trustee conducting a public auction of the property and using the sale proceeds to repay the lender.

Non-recourse. A clause in a promissory note stating that the borrower is not personally liable to the lender if the loan goes into default.

Note. An abbreviation for promissory note.

Notice. Written or oral communication of information directly to a person or entity. In a foreclosure context, notice can be by personal delivery, mailing, posting it on the property, publishing it in a local newspaper, or recording it in the county recorder’s office.

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Notice of sale. The notice issued to announce the date, time, and location of the foreclosure auction.

Other People’s Money (OPM). A loan from a non-bank source, usually an individual or a private lending company.

Owner-occupied. The owner of the real property lives in the property as a primary residence.

Per Annum. Latin for “per year.” Interest rates are calculated per annum.

Plaintiff. The aggrieved party that files a civil lawsuit.

Plan of reorganization. An agreement between the debtor and creditors, and approved by the bankruptcy court for repayment of debts pursuant to a specific schedule.

Points. In real estate mortgages, the initial fee charged by the lender, with each point being equal to 1% of the amount of the loan. It can also refer to each percentage difference between a mortgage’s interest rate and the prime interest rate.

Posting. Affixing a foreclosure notice to a door, post, or wall on the property being foreclosed.

Power of sale. A right given to the trustee in a deed of trust (and some mortgages) to conduct a non-judicial foreclosure of the property, rather than going through the lengthy process of a judicial foreclosure in court.

Preliminary injunction. A court order prohibiting the lender from foreclosing during the pendency of a lawsuit.

Pre-payment penalty. A clause in the promissory note that allows the lender to charge a penalty fee if the loan is paid off before its due date.

Principal. At any given time, the amount of money owed by the borrower to the lender, not including interest.

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Private mortgage insurance. Insurance obtained by the lender, but paid by borrower, which protects the lender in the event they foreclose and lose money on the loan.

Promissory note. A written promise to repay money that has been loaned.

Purchase money. Money loaned by the seller, or a third-party lender, used by the buyer to pay all or part of the purchase price of a house.

Receiver. During a judicial foreclosure, the court appoints a person to manage a multi-residential or commercial building and collect the rents from the tenants.

Reconveyance. Once the promissory note has been paid in full, the trustee will cancel the deed of trust, return the original document, and record a reconveyance in the county recorder’s office.

Recording. The procedure of filing documents in the county recorder’s office or courthouse in order to give public notice of real estate transactions. In this way, the government office becomes a clearinghouse of deeds, liens, reconveyances, easements, and similar documents, recorded against a par- ticular property.

Recourse. A clause in a promissory note stating that the borrower is personally liable for payment of the loan.

Redemption. The right to stop a foreclosure by paying off the entire loan. After the foreclosure auction, the right of the former homeowner to buy back (“redeem”) his property by paying the auction sales price.

Redemption period. The time period in which the homeowner can buy back the property by paying off the total balance of the loan. The time period is different in each state.

Refinance (Refi). Paying off the existing loan(s) encumbering a property with funds obtained from a new loan.

Reinstatement period. The period between the time the foreclosure started

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and before the actual auction, in which the homeowner can cure the default and stop the foreclosure by simply paying the arrearage.

Rents and profits clause. A clause in the mortgage or deed of trust that allows the lender to collect the rents directly from the tenants if the borrower defaults on the loan.

REO. Acronym for “real estate owned” by the lender. Real property sold to the lender at a foreclosure auction because no one else bid more than the lender’s opening credit bid.

Reorganization. Efforts by a debtor during a chapter 11 or 13 bankruptcy to restructure his assets and debts as part of a plan to repay creditors.

Return on Investment (ROI). A performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. To calculate ROI, the benefit (return) of an investment is divided by the cost of the investment; the result is expressed as a percentage or a ratio.

Rescission. The act of canceling a previously executed document.

Sales Comparison Approach. This approach estimates the value of a house by comparing it to recently sold houses in the area (called “compa- rables” or “comps” for short).

Seasoned Loan. A loan that has been on the lender’s books for one year or more and has a good repayment record.

Section 8. Authorizes the payment of rental housing assistance to private landlords on behalf of approximately 3.1 million low-income households.

Secondary market. Informal market in which lenders sell their loans to Fan- nie Mae, Freddie Mac, investment groups, or other lenders, so that they can recycle the funds into making more loans.

Secured. Loans are either secured or unsecured. Loans are secured by mortgages or deeds of trust, in which the borrower has pledged the real

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property as security for the loan. If the loan is not repaid, the property is foreclosed.

Security. Property pledged to the lender to assure payment of the loan.

Senior lienholder. The lender with the earliest recorded mortgage or deed of trust recorded against the property, which has priority over all subsequently recorded (“junior”) liens.

Sheriff’s deed. The deed issued by the sheriff to the highest bidder at a judicial foreclosure auction.

Short sale. Having the lender agree to accept less than the full balance of the loan when the property is sold. (Also called “short pay”.)

Skin in the Game. A term coined by renowned investor Warren Buffett re- ferring to a situation in which an investor uses his own money to invest in a property.

Sold-out junior. A lender whose junior mortgage or deed of trust is eliminated when a senior lender completes a foreclosure sale of the property.

Statutory redemption. In a judicial foreclosure, the legal right to take back (redeem) the property after the foreclosure auction by paying the price the property sold for at the auction.

Sub-contractors. Contractors that specialize in a specific skill such as plumbing, electrical, drywall, heating, etc. Subject to. The term refers to buying a house subject to the existing loan. The existing loan remains in the homeowner’s name, but the new owner takes over responsibility for making the mortgage payments.

Temporary Restraining Order (TRO). A court order prohibiting the lender from foreclosing for a brief period (i.e. two weeks) until the court can conduct a hearing to consider the issues in dispute.

Tenant. A party holding possession (without holding title) of real property for

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a specific period of time in exchange for paying rent.

Tender. An offer of money that is due in satisfaction of a claim, but without any stipulation or condition.

Title. Ownership of real property.

Title abstractor. In certain states, a person is responsible for researching title and liens to real property.

Title insurance. Insurance purchased by the seller to insure that the buyer receives clear title to the property without any interfering liens. Title insurance is also purchased by lenders (and paid by buyers) to insure that the lender’s mortgage or deed of trust will be recorded in the proper priority position.

Trustee. In a deed of trust, the party that holds legal title to the property as security for the repayment of the promissory note. The trustee’s responsi- bilities are limited to reconveying the deed of trust when the borrower pays off the loan, or conducting a non-judicial foreclosure if the borrower does not repay the loan. In a bankruptcy context, the trustee takes control of the debtor’s assets and is responsible for selling them to pay off creditors.

Trustee’s deed. The deed given by the trustee to the successful purchaser at the trustee’s sale.

Trustee’s sale. A public auction of real property conducted by the trustee (or auctioneer on behalf of the trustee) at the conclusion of a non-judicial foreclosure.

Trustor. The legal name of the homeowner in a deed of trust who pledges real property as security for repayment of the loan.

Unlawful detainer. A lawsuit by a landlord against a tenant who fails to pay rent or refuses to relinquish possession of real property upon the termination of the lease. If the property is sold at a foreclosure auction, the new owner can file an unlawful detainer action to have the former homeowner or tenant evicted.

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Unsecured. Loans are either secured or unsecured. If the loan is unsecured, the borrower has not pledged assets as security for repayment of the note. If the loan is not repaid, the lender must file a lawsuit in court (rather than foreclosing).

VA. Acronym for the U.S. Department of Veteran Affairs.

Venue. The proper county to conduct a lawsuit. In a foreclosure context, venue is proper only in the county in which the real property is located.

Waste. An abusive use of real property, including neglect of the land, struc- tures, trees, gardens, and related improvements, in violation of the mortgage or deed of trust. Although seldom used alone, waste of the property is a related cause for a lender conducting foreclosure.

Glossary courtesy of Lloyd Segal with additions by Sam Sadat.

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RESOURCE CENTER

Hard Money Lenders

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SAM SADAT

• REAL ESTATE FINANCING EXPERT • 25 YEARS ACTIVE INVESTOR/BROKER • AUTHOR, RADIO TALK SHOW HOST • EDUCATOR / MENTOR • NATIONAL SPEAKER

Over the last 25 years, Sam Sadat has been involved in more than two thousand real estate transactions as a principal, partner, lender or broker. He started his career as a loan officer and soon became a top producer at his bank. Sam left there to become president of Global Home Loans, a mortgage banking company that under his leadership, grew to have more than one hundred million dollars in annual loan originations. Sam is now the CEO of Global Financial Net- work, LLC. GFN has worldwide real estate inter- ests, one of them being Investor Funding Re- sources, which provides private money mortgages and bridge financing to investors in the fix and flip property business. In 2003 he founded Sam’s Real Estate Club of Los Angeles (LAREIC, LLC). Through the club Sam has helped thousands of people to network, learn and prosper by understanding the fundamentals of wise investing. He believes anyone can succeed in real estate -- but with proper guidance and mentoring it will happen faster with fewer expensive mistakes. One important highlight of Sam’s RE Club meetings is that each week Sam talks about what’s happening now in real estate. Unique among real estate clubs, Sam always provides insights on personal growth, creating a positive mind set, and main- taining your motivation. Sam’s RE Club has been featured on KTLA Channel 5 News, LA Times, Daily News and many others as one of the best networking and educa- tional venues in Southern California. Over the years Sam’s true passion has become to use his depth of knowledge to educate old and new investors alike on latest trends as well as the tried and true. He has come to believe that only through the process of continuing education will an investor gain the necessary knowledge to navigate through these changing currents. Licensed broker by California Department of Real Estate since 1990 with impec- cable track record. DRE License Number: 00832641 Licensed by NMLS since 2010. License number: 313912

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ACKNOWLEDGMENTS

I am grateful for the help of these friends in making the 20/2 Program possible. Robbie Diggs, Lloyd Segal, William Graham, Eric Volkers and Craig Faczen.

Contact us: Sam’s RE Club 1112 Montana Ave., # 390 Santa Monica, CA 90403 800-998-9930 office 888-902-1667 fax Networking@sam’sREclub.com Visit us on the web: www.samsREclub.com

We know we have a great product and we wish to improve upon it. We appreciate your comments or suggestions as well as your testimonials.

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