Praise for Easier Than You Think There is no one I trust more in the real estate investor circle than Mike Hanna. No one has more integrity, and his experi- ence is second to none. In Easier Than You Think, Mike lays out the most straightforward approach to single-family real estate investing that will benefit anyone getting started. Put it at the top of your reading list! —Joe Pollard, CEO, Vedero Software I've been investing in real estate for over 10 years, and I can honestly say that Mike's book has totally nailed it! This book spells out the process, in easy to understand language, exactly how anyone can leverage real estate to help build true wealth and invite abundance into their lives. —Steve Skains, Investor and National Trainer Success often comes down to surrounding yourself with the right people, and getting information from those that have learned lessons the hard way (on your behalf). Mike Hanna is "the right people", and his straightforward book shares his les- sons learned to help you get started. Real Estate Investing really is a pretty simple business—but you can make it as complicated as you'd like. Do yourself a favor—read this book, and commit to keeping it simple. —Mike Hambright, Chief Nerd, FlipNerd.com Easier Than You Think is a real world approach to real estate investing that will definitely help anyone who wants to succeed. If you want to take your investing to the next level, I highly en- courage you to read this book. —Chasen Smith, Owner, Prime Holdings Mike Hanna is genuinely interested in helping new real estate investors succeed. He knows the business start to finish, and has been a valued mentor and friend for many years. —Jerry Davidson, Real Estate Investor and Client This book is clearly written and provides anyone interested in understanding the details of building a real-estate investment business, an invaluable resource. Mike writes with a style that is easy to read but doesn't skimp on the details that may intimi- date someone wanting to get started. I would recommend it to anyone as a must read! —Andreas Melder, Serial Entrepreneur This book offers many insights into the practical aspects of real estate investing. The answers to many questions beginning in- vestors have are thoroughly discussed, along with many rele- vant examples. I highly recommend it to anyone looking for a reliable guide to real estate investment success. —Tiep Truong, MD Mike’s shows his years of experience by simplifying the com- plex world of real estate investing. He answers the questions you didn’t know you had, and definitely puts the reader on a path to success. —Maureen McGuire, President, Texas Republic Bank Easier Than You Think AN EXPERT'S GUIDE TO SINGLE-FAMILY REAL ESTATE INVESTING Mike Hanna Circumference Press Easier Than You Think: An Expert's Guide to Single- Family Real Estate Investing Copyright © 2017 by Mike Hanna Published by Circumference Press All rights reserved. This book may not be used or reproduced in any manner, in whole or in part, stored in a retrieval system or transmit- ted in any form (by electronic, mechanical, photocopied, recorded or other means) without written permission from the author, except as permitted by United States copyright law. No liability is assumed with respect to the use of information con- tained herein. While every precaution has been taken in the prepa- ration of this book, the author assumes no responsibility for errors or omissions. Neither is any liability assumed for damages resulting from the use of information contained herein. Cover art by Shannon Durst Interior layout by Jonathan Peters, PhD ISBN: 978-0-9903262-6-7 Printed in the United States of America CONTENTS Prologue ...........................................1 Introduction .......................................5 Section One: Laying the Foundation for Real Estate Investing .........................................7 Chapter 1: What You’re Going to Get From This Book ....9 Chapter 2: What is a Real Estate Investor? .............15 Chapter 3: The Keys to Getting Started ................19 Chapter 4: The Power of a Mastermind Group ..........25 Section Two: Investing Strategies ................31 Chapter 5: Your Real Estate Investing Strategies ........33 Chapter 6: The Deal ................................39 Chapter 7: Wholesaling .............................43 Chapter 8: Flipping Property ........................53 Chapter 9: Rental Property ..........................69 Section Three: Due Diligence ....................81 Chapter 10: Introduction to Due Diligence . 83 Chapter 11: Determining the ARV ....................87 Chapter 12: How to Determine the ARV with a Garage Conversion .......................................99 Chapter 13: Determining with Necessary Tangible Improvements and Scope of Work ...................105 Section Four: Deals ............................. 115 Chapter 14: Finding Deals .......................... 117 Chapter 15: The MLS and Wholesalers ............... 121 Chapter 16: Buying Direct ..........................129 Chapter 17: Qualifying a Deal .......................145 Chapter 18: Successfully Making Offers ...............155 Chapter 19: The Risk of Buying Multiple Real Estate Deals Simultaneously ...................................167 Chapter 20: Funding Your Deals ....................173 Chapter 21: Is it a Good Time to Invest in Real Estate? ..187 Appendix .......................................197 Glossary .........................................199 Example Mail Campaign: Letter ....................203 Example Mail Campaign: Postcard ...................204 SOW Spreadsheet .................................205 Acknowledgements ................................208 This book is dedicated to my amazing wife Mary Jane, and my loving daughters Audrey and Rachel. PROLOGUE n some ways you could say September 2003 was a turning Ipoint for me. My wife and I had just moved into a new house with our three-year-old daughter, I got fired from my job, and then my wife told me she was pregnant with our second daughter. And that was all in the first week! What’s more, we were unable to sell our previous home, and instead, it became a rental. So there was a lot of stress at that time and pressure to make things work. Looking to make a career change, I decided to go into real estate full time. I didn’t even know what that meant, but I had a family to take care of and was determined to figure it out quickly. I already owned some rental properties with a couple of partners and decided to start there by working with them to expand our portfolio within the partnership. Burning Through Savings Since the properties didn't provide enough cash flow to sup- port taking a salary, I liquidated my 401(k), moved my invest- ment portfolio to cash, and throughout the next year purchased more rentals with my partners, all while burning through more of my savings. If you’ve been there, I know you understand how expensive a four-year-old and six-month-old can get in addi- tion to all of life’s other expenses. If you haven’t, trust me, it can be significant. Looking at my dwindling bank account, it didn’t take long to figure out something had to change before I’d burned through all of my reserves. 1 Easier Than You Think To add to the level of stress I was experiencing, I would get random calls from recruiters checking in with me to see if I was interested in interviewing for a software sales job, my prior pro- fession. Since my financial situation was eroding, this was very tempting to consider. This created a mental battle about what was the right thing to do for my family. Do I move forward with real estate investing or get a full time job? I actually went on an interview just to investigate one of the opportunities presented to me. It required full-time travel away from my family to work for some technology company that didn’t seem to know where it was going. Needless to say, I became disinterested about ten minutes into the interview. I stayed for the rest of the painful interview as a courtesy, when I should have politely told them this was not for me and just left. The entire time all I could think about were the real estate calls I needed to take and the appointments I had for later that day. I knew I would never be happy returning to that world, and this interview cemented this decision for me. I ultimately turned down every recruiter call and told them to take me off their list. Changing Direction To raise some money and move in a different direction, I sold both my interest in the partnership and my former home to the tenants that were living there. Having made a decent profit on both, I put all of that money into real estate and began wholesaling properties. This wasn’t easy. In fact, wholesaling took time to figure out. At that time, the Dallas/Fort Worth real estate investor market was not nearly as diverse as it is today. Back then, for a wholesale deal to sell, it had to be priced much lower than today’s market pricing, or selling it could be a nightmare. It took about nine months before I started getting some consistent and somewhat predictable income. 2 Prologue The First House I Tried to Flip I was improving as a wholesaler but really wanted to make a larger profit. I found my first deal to flip and was in a competi- tive situation with another investor/buyer. I decided to pay a bit more for the deal in order to secure it, because I believed I was going to make at least $20,000 after all expenses. I was totally wrong. 3 I purchased the house for $55,000, and like most beginners, I overestimated the value, underestimated the repairs, and basically paid too much for the house. In Chapter 8: Flipping Property, I will discuss each one of these components and how not to make these mistakes.