Resources mentioned in the podcast

Acorns

Betterment

Traderview

MT5

https://www.betterment.com

https://www.acorns.com

https://www.metatrader5.com/en (download and install)

https://www.mql5.com (website)

ChatGPT Prompt For Identifying Low Fees

Antonio T Smith Jr taught me that fees on exchange apps should be low, in order to not have my earnings be paid out in fees. Can you please give me worse case scenarios fees in percentage and best case scenario fees in percentage. Make assumptions based on best practices and assume I want to make a lot of money and keep that money, while trading thousands of times a year. 

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Deaunna Marie

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Podcast NotesIntroduction

• Ladies, I forgot the subject for today, but first, what are you drinking or smoking?
• I'm drinking something called Red Fuel. It’s strawberry and pomegranate with organic fuel, like an energy drink, along with water.
• That sounds unhealthy.
• Grace, what are you drinking?
• I had Coca-Cola earlier with breakfast, and now I have water.
• That's unhealthy too. Coca-Cola for breakfast? Seriously?

Start of Podcast

• "Drink, Smoke, Stocks, and Crypto" Podcast is live.
• What’s the subject today?
• Subject: Generating income to invest.

Key Concepts: Making vs. Generating Money

• Making money: Trading time for money.
• Generating money: Creating a product with trading power and presenting it to a market.

Starting Points for Generating Income

• Start with:
• Current salary
• Checking or savings account
• Selling clothes from your closet (e.g., eBay)
• Borrowing from family
• Other options:
• eBay, Amazon, or sales funnels (ClickFunnels)
• Sell physical goods like pies or products outside of stores.

Initial Investment Amount

• Start investing with as little as $10 to $500.

Investing Apps

• Acorns – good for starting small investments.
• Betterment – low fees and provides investment guidance.
• Consider using apps with low fees to get started.

Asset Allocation

• Younger investors (under 59):
• 90% stocks, 10% bonds
• Older investors (60+):
• More bond-heavy to hedge against risk.
• Your risk tolerance and financial goals should guide your allocation.

Investment Tools

• TradingView and MetaTrader 5 (MT5) for more advanced stock trading.

Fees

• Watch out for high fees.
• Avoid 5% fees on trades, especially when trading hundreds of times a year.
• Aim for lower fees, like 0.5% to 1.5%.

ChatGPT Prompt for Fee Research

• Use ChatGPT to ask:
• What are the best and worst-case fee scenarios for exchange apps?
• Include assumptions for trading thousands of times per year.

Podcast Resources

• Acorns: acorns.com
• Betterment: betterment.com
• TradingView: tradingview.com
• MetaTrader 5: metatrader5.com, MQL5: mql5.com

Importance of Fees

• High fees can erode your investment returns.
• For example, 5% fees on hundreds of trades add up quickly.
• Look for apps with lower fees to protect your earnings.

Monopoly Investment Strategy

• Play Monopoly with real estate:
• Buy every property you land on.
• Even if you don’t want it, buy it for trading power later.
• If you don’t buy, someone else will, and you’ll pay them.

Commercial Real Estate Strategy

• Billionaire Answer: You need $250,000 liquid to invest in commercial real estate.
• Use it to buy properties worth $1 million.
• Invest in properties that are already generating income – avoid fixer-uppers.
• In Monopoly terms: Buy four green houses, trade them for one red hotel.

Building Wealth

• Start with smaller properties like fourplexes, which are great for building wealth quickly.
• As you grow, you can leverage equity from those smaller properties to invest in larger deals.

Commercial vs. Residential Property Strategy

• Commercial Property:
• Buy something already cash-flowing.
• No need for repairs or fixing.
• We are not buying distressed properties, we are buying assets that function like banks.
• Residential Property:
• Buy something that needs to be fixed (distressed properties).
• These properties aren’t already cash-flowing.
• Distressed Properties: Could mean the owner or the property itself is distressed.
• Target: Buy at 65%-75% of its value.

Cash Flow Example for Commercial Properties

• Example: Buying a $1 million apartment complex.
• The property’s cash flow will pay for the loan.
• Use this cash flow as collateral to:
• Prove financial responsibility (after 6 months of on-time payments).
• Refinance or get a loan for another property.
• DCSR Loans (Debt Service Coverage Ratio):
• No need for a credit score, the loan is based on whether the property can cover its debt.
• Properties are used as down payments for future investments.
• Revolving Line of Credit:
• Prove you can service the debt, then continue using it.
• Antonio’s example: $20 million revolving line of credit.

Process for Buying Properties

• Commercial:
• Focus on cash-flowing properties.
• Use their value to support future investments.
• Residential:
• Focus on distressed properties (buying undervalued assets).
• Pay 65%-75% of the market value to leave room for repairs and equity.

Example: Residential Property Calculation

• Property Worth: $225,000.
• Offer 65%-75% of value.
• Example: Offer $168,750 (75% of the market value).
• Use the savings for repairs and renovations to increase equity.

Equity in Residential Properties

• Goal: Always buy properties with equity.
• Don’t pay full price for properties that need repairs.
• Equity ensures you make money when you buy, not just when you sell.

Financial Breakdown for Rental Properties

• Loan: Largest expense.
• Taxes & Insurance: Either paid monthly or included in the mortgage (escrow).
• Property Manager: Typically takes 10% of rent.
• Maintenance Budget: Recommended $200-$500 per month.
• The amount depends on whether the property has undergone 100% repairs.

Property Manager’s Role

• Responsibilities:
• Collect rent.
• Handle maintenance requests (e.g., fixing cabinets, AC, water heaters).
• Manage tenant relations (e.g., lease agreements, inspections).
• Negotiation:
• Standard 10% of rent.
• Possible sliding scale (6%-12%) based on performance and property volume.

Itemized List of Expenses for a Fourplex

1. Loan Payments.
2. Taxes (e.g., $3,000/year, divided into monthly payments).
3. Insurance.
4. Property Manager: 10% of rent collected.
5. Maintenance Budget: Typically $200/month for well-repaired properties, more for those needing work.

Final Thoughts on Property Management and Repairs

• Maintenance Budget:
• Ensure you have a budget for unexpected repairs (e.g., tenant damage).
• Avoid being a slumlord—do full repairs before renting out.
• Hiring Property Managers:
• Look for people with integrity and good character.
• Build long-term relationships (30 years or more).
• Construction Waste:
• 50% of all construction costs are typically wasted.
• Find contractors who are mindful of your budget and focused on efficiency.

Offer Calculation Process

• Question: Is the offer based on 65-75% of $400,000 or $450,000?
• Answer: It’s based on the asking price (in this case, $400,000).

Offer Calculation Example

• House Value: $450,000, Asking Price: $400,000.
• Multiply $400,000 by 65% to get an offer of $260,000.
• This is to leave room for repairs and build equity.
• Further Calculation:
• You could subtract the estimated repairs from $260,000 to lower the offer, but Antonio recommends negotiating using 75% of the asking price to avoid complications.

Formula Breakdown (75% Rule)

• Multiply the asking price by 75%:
• $400,000 × 75% = $300,000 (initial offer).
• From this number, subtract repair costs to finalize the offer.
• Example:
• If the roof repairs cost $30,000, adjust the offer to $270,000.

Personal Strategy and Walk-Away Price

• Personal Walk-Away Price:
• Antonio negotiates down to $300,000 and won’t go over that.
• The $300,000 becomes the firm price—if the seller demands more, he walks away.

Incorporating Repairs

• Include repair costs in your loan request.
• Example:
• Roof costs $30,000, and other repairs cost $50,000, totaling $80,000 in repairs.
• Total purchase price becomes $300,000 + $80,000 = $380,000.
• Equity after Repairs:
• If the property is worth $450,000, with repairs it may increase to $650,000, giving $270,000 in equity.

Negotiation with the Bank

• After repairs, get the property appraised to increase its value.
• The property was bought for $300,000 with $80,000 in repairs, but the value rises to $650,000.
• Result: $270,000 in instant equity after the new appraisal.
• Next Step: Use this equity to finance the next property.

Scaling Up with Equity

• Monopoly Strategy:
• Use one property to get equity and buy another.
• Keep scaling up until you own multiple properties.
• Each property can act as collateral for larger deals, like 200-300 unit apartment complexes.

Commercial vs. Residential Formula

• Commercial Formula (5 to 12 units):
• Different formula, based on DSCR loans (Debt Service Coverage Ratio).
• DSCR is used for commercial properties and measures whether the property can cover its debt.

DSCR Loans and Down Payments

• DSCR Loan: Measures if the property’s income covers the loan's debt.
• You may need 25% down, depending on the bank and the property.
• Down Payment Example:
• Property purchase: $380,000.
• 25% down = $95,000 required.

Down Payment Assistance

• Search for down payment assistance programs by county.
• Example: Google "Galveston County Down Payment Assistance" to find local programs.
• Assistance can cover up to $35,000 of the down payment.

4-Plex Strategy

• Use the 4-plex strategy to build wealth:
• Instead of buying 5-12 unit properties, buy 4 fourplexes (16 doors total).
• Use these as collateral to acquire larger properties, like a 200-300 unit apartment complex.

Equity and Loan Structure

• Loan Example:
• With 16 doors as collateral, you can get a loan of around $12 million.
• Use this to buy a large apartment complex in a prime location, such as a metropolitan area.

Trusts and Corporate Structure

• Considerations for Asset Protection:

1. No assets in operational companies (to protect from lawsuits).
2. Each property in its own entity for protection.
3. Establish a revocable trust to hold valuable assets.
4. Move assets to an irrevocable trust for long-term protection.

Closing Remarks

• Execute on advice from each episode to learn and adjust.
• Keep all income-producing assets in their own entity and maintain strict separation between operations and asset ownership.