Accelerator: 2.2 Preparing for Deal Flow

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2.2 Preparing for Deal Flow
Cheat Sheet

1. Light at the end of the tunnel
  1. At this point of the training, you should have taken measures to fix your credit.
  2. Hopefully, you’ve had some results with negative items being removed from your credit report.
  3. In regard to budgeting, you should have reached the following goals:
    • Saving 10% of your gross income through autosave.
    • Refinancing an auto loan (if you have one) for a lower interest rate. 
    • You’re reducing your living expenses by 10%.
    • You’re apply the 3 bucket rule:
      1. Giving a percentage of your income to charity
      2. Using a percentage of your income for investing
      3. Putting away a percentage of your income for a rainy day/ reserves
  4. Savings deployment:
    • When you have 3 months of living expenses saved, start using the 10% of your gross income to pay down debt to credit ratio to 30% of the credit line.
    • Once your debt to credit ratio is at 30% or below, save the 10% for property reserves.
  5. Monitor your credit:
  6. Work on yourself:
    • Get the rest your body requires.
    • Eat healthy, eat whole clean foods.
    • Be physically active; but check with your doctor regarding your limits.
    • Work on personal development.
    • Learn soft skills:
      1. How to sell
      2. How to manage
      3. How to be organized
      4. Time management
    • Work on your spirituality to be more grounded.
    • Expand your circle by networking.
  7. If you’re not seeing the results, then look within to find your power:
    • Take responsibility
    • Be accountable
    • Focus on success
    • Join the 100PF community for support
  8. Set a goal to become an owner occupant multi-unit investor:
    • Must have a credit score of 680.
    • Must have your debt to credit ratio 30% or below.
    • Must have $10k or more in property reserves.
    • Must have your financial documents in order.
2. Prepare your fields
  1. You may need to have more than $10k in property reserves based on your area.
  2. Gather your financial documents:
    • Copy of your credit report
    • 2 recent bank statements
    • 2 current pay stubs
    • 2 most recent 1099s if you’re self employed
    • 2 most recent W2s if you’re employed 
    • 3 years of most recent tax returns
    • A completed copy of your Personal Financial Statement (PFS).
  3. Calculate your purchasing power:
    • Access the Affordability Calculator.
    • Enter your annual income, monthly debts, and your down payment to get an estimate of the mortgage amount that best works with your budget.
    • You can locate properties on Zillow based on your purchasing power:
      1. Locate the tab “Buy” on the upper left side of the screen:
        • Enter the city or zip code of interest.
        • Put in the price range that the Affordability Calculator estimated for you.
        • The map will outline areas that meet your criteria.
        • On the right side of the page, there will be photos of properties. Click on the photo(s) for more details.
  4. Build your team:
    • While still on the Affordability Calculator, access mortgage providers by selecting the tab “Lender Reviews:”
      1. Type in your location, language, and click search.
      2. Read the lender reviews.
      3. Reach out to mortgage providers that service your area by messaging or emailing. Their contact information is available on the far right side of the page once you open the reviews.
        • When contacting a lender, use this script.
    • You can locate agents by going back to the home page and selecting “Agent Finder” at the top of the page.
      1. Enter the zip code of the area of interest and click search.
        • When contacting an agent, use this script.
  5. Market selection:
    • Select an area to live in that is within 30-60 minutes commute time from your place of employment.
    • Pick nice areas that fit your purchasing power.
      1. If the area of interest doesn’t fit your purchasing power, then save more money for the down payment or negotiate for a lower purchase price.
  6. Build a list:
    • Your team should consist of 10 lenders and 20 agents.
    • To organize your contacts, you’ll need a CRM (Customer Relations Management).
      1. Use this CRM to keep track. 
        • The dashboard inside the CRM will give you an overview of all the activity you added.
        • Add all agents data in the “Agents” tab to include: company name, contact info, detailed notes in the description field, and also tag the status.
          1. Be sure to use your OP calendar to follow up with agents at minimum twice a month.
        • Add all lenders data in the “Lenders” tab to include: company name, contact info, detailed notes in the description field, and also tag the status.
        • Under the “Opportunities” tab, list out potential deals.
          1. Include: property name, address, win or loss status, value, closing date, reason if lost, priority, source where deal was found, and a description.    
    • Reach out to a mortgage broker:
      1. Find your own lender on Zillow or apply here and a preferred mortgage broker will contact you.
3. Deal flow
  1. Once agents begin sending you deals to your inbox, be sure to apply the 1% rule:
    • The gross monthly rent should be equal to 1% or greater of the purchase price. Add the amount to the Deal Analyzer.
  2. To find out the market rents for the area of the property, go to:
    • Rentometer and type in the address, the estimated rent, and click analyze the address.
    • Go to Craigslist and look for properties similar to yours for the average rent amounts.
    • Search online for public assistance organizations, like Section 8, in the area for average rent amounts. 
    • Ask agents for their opinion on what the market rents are in the area.
    • Train your agents to find deals that fit your buying criteria and purchasing power. 
      1. This way, when a deal comes in, you’ll be the first one they contact.
  3. Property type:
    • Once you find a property you want to purchase, schedule a virtual or physical tour of the property:
      1. Look for 2-4 units.
      2. Make sure the units are in livable condition and occupied.
      3. You will need one unit vacant so that you can live there:
        • Take the unit of lowest rent for your own residence.
      4. While touring the property, make sure the neighborhood has low crime, good schools, and is in an emerging market.
      5. Take photos of every room, front, back, and sides of the property.
    • House hack:
      1. You may be able to rent out some of the units under the Airbnb model.
        • Sign up for an Airbnb account:
          1. Check the zoning laws in the area to see if it’s permissible to operate an Airbnb.
          2. Start off using Airbnb recommended rent amounts, and then increase overtime.
          3. Set the unit up for comfort and cleanliness; you want good reviews.
    • Shoot first and ask questions later:
      1. Once you find a deal that meets your criteria,submit an offer:
        • Use the Letter of Intent (LOI).
        • Perform the due diligence and during this time, you will ask your questions. Ask for 45 days to complete the due diligence process.
Words of advice
  • Mortgage lenders/ brokers will want to run your credit, but only allow them to do so once they pre-approve you with a verbal confirmation.
  • Give lenders/ brokers a copy of your credit report and ask them do they think you’ll be approved based on your credit history.
  • Mortgage lenders want to see your net worth to be equal to the purchase price of the property you want to buy (in case they need to recoup their money if you default).
  • Within your PFS, there’s a balance sheet, Details sheet, Cash Flow sheet. 
  • The balance sheet shows your net worth by taking your assets minus your liabilities. 
  • The details sheet is so you can record data about your asset and liabilities. 
  • The Cash Flow sheet lets you see what income is coming in and how much money is going out. 
  • The objective is to get pre-approval when contacting a lender. If you don’t pre-approved then seek out another lender or find a co-signer.
  • Don’t contact an agent until you have a pre-approval and the capital.
  • Do not sign an exclusive buyer’s agreement with an agent, because it will lock in the agent to get paid off of every deal you do, even if the agent didn’t represent you in a deal.
  • When actually selecting an agent, go for a listing agent because they can negotiate better terms for you since they’re working with the buyer and the seller.
  • If you find that a unit is under rented, then you may have to evict the tenant if they refuse to accept an increase in rent. 
  • Taking plenty of photos of properties of interest, because it helps you remember what each property has to offer; plus you’ll be able to test the properties by listing them on Airbnb to see if they make for a good investment. 
  • If someone books with you through Airbnb, you can quickly remove the listing without any penalties. 
  • When you submit an offer for a 1-4 unit property, your earnest money deposit should be $1,000 and no more than $2,000.
  • If the seller declines allowing for 45 days for the due diligence process, then accept nothing less than 30 days.

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