Don’t walk away from great deals just because you THINK you don’t have enough cash!
All too often, real estate investors think they have money problems, when what they really have are IDEA problems.
Today on Financial Freedom Friday, Matt shares his new money ideas for investing in real estate including creative offers, seller financing, and more. He walks you through the step-by-step process any investor can do when faced with an amazing deal and empty pockets.
What You Will Learn About New Money Ideas for Investing in Real Estate:
- Why not having the cash for a down payment on a property is often an IDEA problem, not a MONEY problem
- Why having LESS money can actually be to your advantage
- Multiple creative financing strategies
- The first place you should look for financing
- How to negotiate with sellers
- Why your credibility, network, knowledge, or actions might be the real problem behind your “money issues”
- Which problem you should focus on first – finding the deal or finding the money
- The big mistake people make when they DO have money for deals
- How to pass off the responsibilities of property ownership while collecting monthly rent checks
- Why thinking small produces the biggest results
- It’s been great meeting you virtually. Would you like to meet in person? Our next live event is right around the corner! Go to EpicIntensive.com for the details.
- Need money? We have secured more than $15,000,000 of funding for the Epic community, people just like you. Get access to fast cash for your real estate investing business with our “one-of-a-kind” credit-based funding program at EpicFastFunding.com
- Need time? Work on your business rather than in your business by leveraging the time of others. Access free information and find real estate-trained virtual assistants to help you free up your time. Learn more at VAsForRealEstate.com.
- Need training? The ultimate training environment for real estate investors: Version 3.0 of The Epic Pro Academy! New look, new lessons & new content – we’ve got everything you need to know to get your first paycheck!
- Need someone to do it all for you? If you’re an Accredited Investor, you can diversify your portfolio by hitching your wagon to our train and share in the profits. Go to EpicWealthFund.com to download the executive summary.
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Speaker 1: It’s time for Financial Freedom Friday with Matt Theriault.
Matt Theriault: Real estate investing is work, especially in the beginning. Working your daily success report on a daily basis, tracking your activities, and keeping score, that’s what the work looks like. So now you know. Now you’ve got clarity around that. If you aren’t willing to take that on, if you’re not willing to work for it, this business is not going to work for you. You might as well just stop watching right now, and just go find something else to do. Seriously, I’m not going to blow smoke up your ass and promise you a fantasy that happens all by itself. There are plenty of people out there that will already do that for you. You don’t need another one. We don’t need any more of those.
Here, let me show you the results of this type of work. You see this right here? This is something that we post every Friday in our private Facebook group. We call “Fridays Follow Through Friday.” We call it that because most people don’t. This is Follow Through Friday. This is where the community posts their wins for the week. Some are big, some are small, but a win is a win. It’s small wins that really count, because they stack upon each other, and they build momentum. They compound. You get a bunch of those small wins, and all of a sudden they’re creating big wins. That’s what the daily success report is really modeled after, small wins that compound into big success.
All right, so you’ve probably noticed, and you may be wondering, why I’m sitting in front of this pile of poker chips. Oops. What does this have to do with your real estate investing? I’m going to show you how they relate to your growth when you start implementing the strategies that I’ve been showing, and will be showing. I’m going to show you that in a second, okay? Then I’ll clean up my mess here real quick.
All right. It’s late. I don’t want to start over, so you’re just getting the real deal, all right? For the last piece of instruction in this series, I’m going to pick up from creative offers, seller financing, and the money problem that frequently gets created, and I’m going to show you how to solve it. After reading all of the comments below, reading all of your emails, after seeing everything from these video sessions over the last few days, it seems like this lesson right now couldn’t have come soon enough.
Let’s talk about everybody favorite subject, seemingly, money. To keep it simple and efficient so we don’t have to start from scratch, let’s just use the basic foundation of Nathan’s deal from yesterday. Nathan showed us his recent deal where he got the cellar to carry back financing. The basic terms of Nathan’s deal were $9,000 down and $500 in principal only monthly payments. The property would rent for $1200 a month or so, it was right in there. He didn’t say the amount that he paid for the property, but the property is in Spokane, Washington. I did a little bit of research, and the median sales price there is $190,000. Nathan said he paid pretty close to full price for it. Based off of Nathan’s training inside The Epic Pro Academy, that would make sense giving that his $9,000 down payment was probably 5% of the purchase price. That would put the purchase price right at 180 grand.
Anyway, I just kind of reverse engineered that. The price, the purchase price doesn’t really matter too much for what I’m about to show you, but let’s just put it there for information’s sake. Nathan, as I showed yesterday, with these principal only payments, is going to experience a 96% cash on cash return from this property as a landlord. Let’s say that this is his fourth or his fifth deal of the month like that, because that can happen when using the three option letter of intent as a prospecting tool.
Here comes the money problem that I mentioned that can get created. You’ve got three or four of these things. What if Nathan didn’t have the $9,000 to put down? For those of you that were commenting below about money challenges, this could be your first deal, and you don’t have the $9,000 to put down. What are you going to do? Are you just going to not do the deal?
Nathan, he paid almost full price for this property. Wholesaling it, or fixing and flipping it, those aren’t realistic possibilities. There’s no equity. Should you just walk away since you don’t have nine grand? No. I mean, it’s a 96% cash on cash return, right? You can’t walk away from something like that. What do you do? Where do you get the money to make this happen? Where do you get the money to put this all together?
This lack of a $9,000 down payment is not a money problem. It’s an idea problem. Let’s look at some different ideas for finding $9,000, okay? The first one, the first one that comes to mind, that’s always where I look first, is the seller. Would they be willing to finance the nine grand down under say, different terms? Like would they be able, they’ve already giving him seller financing on the first, would they be able to do seller financing on the second, a second loan? Perhaps something much shorter, like, you know, give you six to twelve months to pay off the nine grand.
If they agree to that, I don’t know. Ask for more. Ask for maybe a three month moratorium on the payments, giving you three months of no payments to find the money, or give you some time to close other deals and pay with the proceeds from there, right? Different ways that you can structure that. If the seller wouldn’t do that, it’s only nine grand. Do you have anything of value that you could sell?
You could always buy it back later. Do you have a jet ski or a motorcycle that you hardly use? Is it off season and you could buy it back during season? These are just some ideas. Some are going to fit, some won’t. Just try them on like a new coat. Look in the mirror, if it feels good, keep it. If it doesn’t look good, put it back on the rack, try something else. That’s what I’m talking about.
How about a credit card? Maybe you could finance it yourself, right? Do you have stock that’s underperforming that you could liquidate? Do you have a 401k at your job you could borrow from? Do you have an old 401k from a previous job? Any gold or silver laying around? Any cash value life insurance?
Any other real estate that you could refinance or sell? I mean, even your primary residence, could you pull some money out of that? We’re talking a 96% cash on cash return here. How much is your money earning on those other places that we just discussed? Even if you had to pay a penalty on anything, like your 401k, 96% ROI makes up penalty payments pretty darn quickly. Although we’re talking about just $9,000, understand that the amount of money, that’s not the issue.
If it were $90,000 that you were short, all of these ideas that I mentioned thus far would still be feasible or any combination thereof. Those are some ideas. Let’s just say none of those work. We have to cross all of that, none of those work. You have to look elsewhere, and that’s fine. You’re holding the ace, you know that, right?
You’re holding the ace and you don’t even realize it. Here’s the ace that you’ve got in your hand. You’ve got a deal under contract. A deal that will produce a 96% return. This is where the big idea is that will solve your money problem. Who do you know that will give you nine grand for half of that return, 48%? Everybody, right?
Who do you know that would give you nine grand for half of that return? It’s 24%. Still, just about anybody and everybody, wouldn’t they? Yeah. Who do you know that would give you nine grand for half of that return, at 12%? Just about anybody. If you don’t know anybody that would give you %9,000 at a 12% return secured by real estate, in this economy, then money might not be the big weakness that you thought it was. Perhaps it’s your credibility or your network.
There’s nothing wrong with that, by the way. That doesn’t make you good or bad, there’s nothing right or wrong here. All it says is, you don’t know enough people that know you as a competent real estate investor, of which maybe, credibility isn’t your biggest weakness now. Perhaps it’s your knowledge and the action that you take based on that knowledge. Maybe that’s the big weakness.
I don’t know, I’m just walking you through a thought process here. I hope there’s a conclusion that you’re starting to draw here. That conclusion being, it’s much easier to find the money when you find the deal first. See, it’s knowledge and action and that’s going to find your deal.
It’s your deal that’s going to establish your credibility, and it’s your credibility that’s going to attract all the money that you’ll ever need. Where can an average person find even a 6% return these days, let alone a 12%. Finding the deal, that’s where the money’s at in this business. Focus on finding the deal. Focus all of your energy and efforts on finding the deal and the money’s going to find you, promise. Swear. I guarantee it.
In fact, you know what, you’ve got no right using anyone’s money until you have found a deal and have secured it under contract. Having said that, if money is not a current challenge for you, meaning you have some, I want you to go bury it in the backyard for the next 89 days. That’s right, I’m not going to let you use your money either.
Here’s why. When people have money, when you have money to spend, guess what people do? They spend it. Guess what, when they don’t have money to spend, what do they do? Yeah, they find better deals. See, you just don’t need a lot of money to be successful in real estate. You don’t. Let it go.
All right, you found the money. Someone in your network gave it to you, okay? Could have been a family member or a coworker, a friend, a friend of a friend, an associate I don’t know … the retirement account of any of the above there. All very realistic ideas, not fantasy land by any stretch, not even close. All very realistic ideas when you find the deal first, okay?
The terms on that $9,000 say, is 7% for five years. You use that to pay the down payment, and now the property, it’s yours, but now you’ve got a new problem. You’re going to need some more money, right? Now you’re a landlord. What if the tenant moves out tomorrow? What are you going to do then?
What if something on the property breaks? How are you going to repair it? That’s your responsibility now. You’re the owner of the property. Where do we get the money for those things? Again, not a money problem, just an idea problem. No big deal. Try this idea on. Rather than renting the property at $1200 to $1300 that Nathan said it would rent for, what if we sold it?
How, there’s no equity, right? We already went down that path. Nathan, he paid retail for this property. Here’s how. How difficult would it be to find a tenant that would be willing to buy this house if the payment were close to the same it would cost to them to rent it? Most people would opt for that, if it cost the same to rent, and they could own instead, most people would go for that. How difficult it would be to find that person? Not difficult at all.
There are plenty of people with poor credit scores that can’t qualify for a conventional loan, and they would rather own than rent if they could. Let’s offer a loan to the buyer, our own seller financing. We become the bank.
Let’s sell for top dollar. We’re going to sell for 190 grand. We’re going to ask for a 10% down payment. We’re going to put $19,000 in our pocket, and then we’re going to carry the balance of $171,000 at 9% amortized over 30 years. That would create a monthly payment for the buyer of $1376. Pretty darn close to what it would cost for that buyer to rent. That’s what’s in it for the buyer.
Let’s look at what’s in it for you. You see you just put 19,000 in your pocket, right? The down payment that the buyer gave you, and you’re collecting $1376 each month from the buyer for rent, or for their mortgage payment. After you make your payment of $178 for the money that you borrowed for the down payment, and the payment of $500 to the original seller, you’re left with $698 of monthly cash flow. What’s more, you are no longer a landlord.
If anything breaks on the property, it’s the new owner’s responsibility, not yours. Since you borrowed the $9,000, you have zero money in the deal now, don’t you? Right. What does that do to your cash on cash return? If you have no money in the deal, it actually can’t be calculated. It turns your original 96% cash on cash return into an infinite one. You just, boom. You created money out of thin air. See? Not a money problem, an idea problem.
How long would it take for you to escape the rat race with a new set of ideas like that? Speaking of ideas, what’s the big idea here with this stack of poker chips in front of me, right? Well, it has to do with how people play poker based on the stack of their chips. Meaning, if you have one player with this big stack of chips, and another player over here with this small stack, how do they differ in the way that they approach the game? How is it different?
We see that the big stack person is bold with their actions, right? They’re less concerned, not terribly attached to the result, as they know a loss is not the end of the world. There will be more hands to play. Now, the small stack person, they play extremely cautiously. They play a much smaller game. If they can even find the courage to continue playing, for the fear of losing, it has them paralyzed.
Here’s the thing, they’re both playing the exact same game, with the exact same rules. It’s the exact same objective, the exact same odds and risks. It’s on a level poker table even. Real estate investing works just like that. Actually, your life works like that. With each chip here representing little pieces of confidence. It’s the amount of chips that you have that determines how you play in life. Just like poker. For example, back in sessions one and two, by taking your three year vision, breaking its achievement down to a 12 month goal and then we broke that down into 90 day projects, then we broke it down into two week springs, you know, like we did that in session two, remember?
Then we broke it down even further to small daily activities using the daily success report. You’re creating small wins for yourself. With each win being one of these little poker chips. Contrary to what you’ve been told most of our lives, what we’ve all been told most of our lives, it’s thinking small that actually produces these big results. Thinking small produces the big results. Here, look at this. This is the success cycle, and it begins right there at the top with confidence. Confidence produces actions, actions produces results, and then results produce success, and success produces more confidence, and around you go, each time adding a new poker chip to your pile.
Now conversely, the same is true here, no confidence equals no action. No action, no results. No results, no success, no success, no confidence. You see, the success cycle works both ways and there is no in between. You’re either on it or you’re not. If you’re just getting started or getting restarted, how do you hop on the success cycle? Where do you fit in? Where do you get in first? Where does that initial confidence come from that causes the action, right? Well, it’s very simple. It begins with education and training.
Education and training is what produces that initial little poker chip of confidence. That empowers that first action. If you’re not on the success cycle, education, that’s how you get on it.