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You’ve heard it before… there are more millionaires made in Real Estate than any other industry.

But how?

Unfortunately, many hear this, go to Real Estate “School”, get their license and before they know it, they have a “job” they never intended to have. They learn how to analyze retail deals they find on their local “MLS” and help others build their wealth, but never make any of that wealth themselves.

Then it gets worse. They are required to take hours boring continuing education classes every year that tell them myths and conventional wisdom that they can NOT invest for themselves…. that somehow that will get them into trouble and put their license at risk.

Well nothing could be further from the truth.

Continue reading “StepStone University: The New Wave of Continuing Education” →

We were advised by a real estate broker when we started buying a rental property, that the market was about to tank and that we should not invest at that time. That was ten years ago. We all know what has happened instead. Since then we’ve been told by others countless times that it is not a good time to invest.

Residential real estate fluctuates along a continuum generally assessed as either a buyer’s market or a seller’s market. Equilibrium between these two is usually considered 6 months of inventory. Months of inventory means how long the current available listings would take to be snatched up if no more inventory came on the market. By these terms we’ve been in a seller’s market for as long as I can remember. This means demand is greater than supply and that sellers hold more negotiating power than buyers. We’ve been able to buy throughout the sellers market successfully by buying distressed property that is harder to sell and solving problems for our sellers. The upside to buying in this market has been that values continued to rise with the market so the equity in those properties rose too.

Continue reading “Why it’s Never a Good Time to Buy Real Estate – but why you should anyway!” →

There was so much to be excited and proud of in 2019. The StepStone team cannot be thankful enough for our wonderful agents and how they have responded to our growth and changes.

It’s easy to sit back and reflect on such a great year. We grew by 50%, ending the year with 255 agents! We are now profitable again since we made our moves and investments to grow beyond 60 agents. We brought back consistent webinars, and we added the concept of the “mini-workshop” completing 8 over the course of the year (with 8 more coming this year!). The smaller, shorter but more frequent format proved to be a huge success.

Continue reading “2020: StepStone for YOU!” →

It is common for real estate investors to think that profit is generated through cash-flow. We pay $1,000.00 per month for property and collect $1,500 per month in rent. Every month we are “making” $500.00.

While this is somewhat true, it’s not always where “profit” truly lies. This is particularly true in owner financed wraps.

It is actually possible to be paying $1,000 per month, collected $1,000 per month and be reaping HUGE profits.

Profit in a wrap is not equal to the cash-flow, but rather that net interest payment. Sure, there can be profit just in the difference in the two notes. For example, if I take over a note of $100,000.00 and give a new note to an end buyer for $150,000.00, I have immediately created $50,000.00 in profit (equity).

But monthly profit is simply the difference of interest collected and interest paid. In fact, that is 100% of the monthly profit. Always. Every time. It’s never more than that. It’s never than less than that. It is always, forever, equal to the net interest. Always. Did I pound that point home?

As an example. If I pay $1,000.00 in principal and interest to an underlying lender, but collect $1,000.00 in principal and interest from the new buyer (now the new borrower), I have $0.00 per month in cash-flow. But I can still have monthly profits.

If my $1,000.00 payment to the underlying lender breaks down such that $500 is applied to principal and $500 is interest, but the amount I collect is $900 in interest and $100.00 in principal, then my profit is $900.00-$500.00 (the net interest) or exactly $400.00.

But I received $0.00! So how can that be true? Well think of the difference that was just created in equity. Remember, I owed $100,000.00. Now I owe $99,500.00. I was owed $150,000.00. Now I’m owed $149,900.00. Instead of $50,000.00 in equity, I now have $50,400.00 in equity.

Another way to think about it is this: I have put $400.00 into a savings account and $0.00 into my pocket. Sometimes, there is cash-flow. So perhaps I pay $1,000.00 but collect $1,200.00. If my payment is $500.00 to interest and $500.00 to principal, and the payment I receive is $700.00 to interest and $500.00 to principal, I’m actually making less money than in the first scenario, even though I’m collecting more! That’s because there has been no change in the equity, although I get $200.00 cash.

So when evaluating a possible Sub2 to Wrap scenario, it’s important to always look at net interest. While cash-flow seems like profit, it’s not always where the profit lies. Even worse, sometimes, your equity can go down even as you cash-flow. Look at the PI payments, compare and make sure your deal generates a profit, not just a cash-flow.

Every year, StepStone Agents come together and sacrifice a Saturday earning no money for themselves. They aren’t at the river, enjoying family or friends and certainly are not having a nice lazy weekend.

Instead, they are setting up tables, registering golfers, conducting games and running credit cards. Instead of planning their next project, they are helping to raise money for someone else’s home construction. Instead of showing buyers around or selling a house, they are helping to build a free house for someone else.

Continue reading “Why We Do This…” →