Epic Real Estate Investing - Creative Real Estate Investing Q & A | Episode 225

Episode Date: October 10, 2016

On this episode of Epic Real Estate Investing we answer questions from the Epic community and discuss creative real estate investing solutions for challenging deals. Not every strategy works in every market, but there is a strategy for every market to find success in real estate. Enjoy!   ______   The free course is new and improved!  To access to the two fastest and easiest strategies to a paycheck in real estate, go to FreeRealEstateInvestingCourse.com or text “FreeCourse” to 55678. What interests you most? E.ducation P.roperties I.ncome C.oaching Learn more about your ad choices. Visit megaphone.fm/adchoices

You know how some people want to invest in real estate but they don't know how? Oh, yeah. And you know how some people want to invest in real estate but they don't have the time? Oh, yeah. And you know how some people want to invest in real estate and they simply don't want to do all that work? Oh, yeah. Do you know someone like this? Mm-hmm.

Perhaps that someone is you? If so, subscribe to the Turnkey Real Estate Investing Podcast, the show for busy people who want to invest. in real estate, but don't have the time or the desire to take on the heavy lifting. Turnkey real estate investing. Subscribe today. It's free. Yeah. Turnkey, real estate investing. This is Terrio Media. Casting from Terrio Studios in Glendale, California, it's time for Epic Real Estate Investing with Matt Terrio. Hello, and welcome to Epic Real Estate Investing, the place where I show people how to escape the rat race using real estate. Now, if you're just getting started or and or I guess you're looking for new and creative ways of making money in real estate,

what I've done is I've put together a free course just for you, including a checklist on how to find motivated sellers. What's a motivated seller? Well, they're property owners that are willing and able to sell you their property at a discount. And why would they do that? Why would people sell property at a discount. Well, they've got some sort of thing going on in their life that has them motivated. It's some sort of issue where they're looking for some peace of mind and motivated sellers will exchange equity for peace of mind all day, every day, and twice on Sunday. So to access the checklist to find motivated sellers like that, motivated sellers that are willing and able to sell your property at a discount, go to free real estate investing course.com. Free real estate investing

course.com. All righty. Let's see. What we got today? The epic intensive video production coming along nicely. It should be done any day now. So if you missed it, if you missed the live event, you want to capture the videos, those are available if you'd like to order the videos from this past epic intensive strategies for a shifting market. We went over so many of those different strategies of what you can implement into your business and make an impact immediately. And a lot of the stuff are just small little tweaks to what you've probably already doing right now. They're going to have a significant impact. Small little tweaks for maximum impact.

And those videos are going to be available at 50% off. They're actually available right now at 50% off for the pre-sale at epicintensive.com. Go to epicintensive.com. Grab those videos. They will not be up forever. I promise you that. And they'll be up for even a shorter period of time at 50% off. So go there.

Get it. If that's what you need right now just to make some small tweaks, small price to pay. pay small investment to make into your business for a significant impact. Our bottom line has virtually been unaffected in the shifting market and what we're doing is revealed inside of those videos at that event and it's all been recorded. So it's there for you at epicintensive.com. All righty. Oh, and speaking of the epic intensive, I've still got a bunch of questions left unanswered. I didn't get to them all last week, but I've got five here that all revolve around creative deal structuring, creative real estate investing.

So I thought, let's create a creative real estate investing themed episode out of those questions. As you know, every time I put the words, it's really funny, every time I put the words, creative real estate investing in the title of an episode, the download number is just skyrocket. For some reason, that is a very appealing subject for most real estate investors. And since I created this small little empire over here with, you know, starting with zero dollars and a terrible credit score, you know, creative real estate investing best. that's all I really had access to. It's what I know now because I just had no choice.

I couldn't do it any other way. I couldn't do it any other way but to get creative. And I love that part that it's what you want to hear the most because it's what I love talking about the most. So let's talk about that some more today. All righty. So let's go through these questions. Let's see.

This one is Keith Allen 52 out of Edmond, Oklahoma. How do you compete when other investors are paying too much for properties? great question how do you compete when other investors are paying too much for properties well Keith I got a great answer for you it depends it's got that's going to be a big it depends because that's probably who knows why they're paying too much for the property how they're paying too much what their intent is what their extra strategy is going to be what's their purpose going to be you know what is their use of that property going to be so if I were noticing this trend in my market of which I am a bit but to answer your question so that it actually helps you and it relates to you,

here's what I would do. I would watch a few properties of which I lost out on due to my competition paying a higher price. A lot of times you're going to go research and of those properties that you lost out on because someone paid a higher price. A lot of those don't actually follow through all the way to escrow. A lot of those things don't close. All right. So what I would do is I would follow those properties to see.

what happened. And if they did close, then I would start looking at, okay, what was their exit strategy? What was their goal here? What was their mission or their motivation? What was their plan for this? Are they holding on to them? Were they still able to flip those properties quickly? Were they able to wholesale it somewhere really quickly? So maybe the market is shifted and the prices have gone up and you didn't even notice. So you could pay more yourself and flip it quickly still, if that's what you're up to? So what did they do? Did they flip it quickly? Or did they add square footage to the property. Did they do something to increase the value somehow and then resell it? Did they change the property's use? You know, did they take it from, you know, a residential to

maybe a multifamily or a duplex or fourplex? Or they take it to commercial, whatever it may be? Or are they just sitting on it? Are they just, did it just buy it and sit on it? Is it just sitting there rotting? Who knows? You know, studying your competition, that can give you some great insight on what there is for you to do in your business. Now, I'm noticing that. We are certainly paying more for properties, but it hasn't been enough of a problem yet for me to go out and do that. But I'm getting close. Some of my markets, I'm going to start looking at that. But what I'm finding myself right now, I'm selling a lot of my properties with seller financing.

I'm selling with seller financing. So the properties that I'm getting under contract, I'm reselling those with seller financing. And what this is allowing me to do is to, it's allowing me to pay more for properties because I don't need that big giant equity hits. so I'm able to still keep my deal flow flowing. And so I'm able to create some instant cash, you know, so I still make some cash right now. Not as much as I was getting, say, a year ago, but I'm still getting cash. But I'm also able to create some monthly cash flow through arbitrage.

So whatever I'm buying at, I'm selling it higher term. So some of those things are seller finance deals that I'm purchased, and some of them are all cash. So depending on what it is, just ask for a bigger down payment. I get most of my cash back out and I've created some cash flow for myself with really great returns. It's a really great ROI doing it that way. And then if you don't have the money to buy the property, great opportunity because of the ROI that you can create, you know, you can pay a good chunk of money on money that you would borrow through your private channels. You know, and Uncle Joe's got,

you know, 50 grand to give to you for you to go take down this house and he's going to, and you're going to take that 50 grand to buy the house. Let's see. Let's work with some real numbers. Just a real good example. say you need 50 grand to buy the house. So you buy that house for 50 grand. You're going to give Uncle Joe 10% on his money. Uncle Joe can't get 10% anywhere else on 50 grand. But you can go and resell that property for 60 grand, right? Sell it for 60 grand.

And say you sell it for 11%, 12%, to another cash flowing investor, or you go ahead and maybe you just match that term of 10%. So now you're paying Uncle Joe 10% on 50%. grand, you're collecting 10% on 60 grand. And then maybe you ask for five grand down. So now you've got this little arbitrage between the 50 and the 55. So you get to keep the difference there. And you also pull $5,000 out of it and put in your pocket as well.

So that's just an example. It's quick and dirty math. I did not really think that out, but that's the concept. Okay? So that's one thing that we're doing here. And I guess the other, I guess the big caveat here is that if people in your market are beating you out of properties because they're paying too much, one other thing you might want to look at, is there a big player in town?

Is there someone big in town with deep pockets that's buying up the place? I mean, I'm pretty sure this has slowed down quite a bit everywhere. It might be still working in some areas. But after the collapse of 2008, 2007, 2008, you know, Wall Street entered the real estate game and started buying as much as they could. What was seemingly with no regard to price, they had no problem paying full market value, maybe even a little bit more. They had a plan.

They had deep enough pockets to just, sit on those properties and wait it out. And if that's happening in your market, then, you know, that's kind of tough to beat. Maybe you have to change the types of properties that you're buying. So you want to buy the same types of things that they're buying because they had a very specific criteria that they were looking for. So maybe you go down into the lower income areas or maybe you start dealing in luxury properties. And don't be afraid of luxury properties or the higher price properties. It's all the exact same work, same types of discounts and same types of, all the moving parts are very much the same. So those are different things that I would look at.

definitely if it's becoming an issue, start following a few of those properties that you're losing out on to see what they're doing. And then second thing is, you know, maybe buying properties at a deep discount and flipping it in the next seven days, that's a strategy that might not be working right now. So you just change your strategy.

There's lots of different options. Wholesailing properties is not your only option. And look, I'm even sitting here assuming that's what you're doing. I don't even know if that's what you're doing. But I know a lot of people are really hot on the wholesale game because it seems like easy money. It doesn't take any money to do.

or very minimal money to turn really good profits and do that frequently. And a lot of people making a lot of money for the last few years doing that. Well, every strategy doesn't work in every single market. And if the market is shifting, then you might have to start analyzing your strategy. But there is a strategy there for every market to make good money in real estate. Okay. So that would be my thought on that. Hopefully, Keith, that helped out a little bit and gave you some insight.

Next question, Wesley, 34, out of Vancouver, Washington. Is there a specific way you market for seller finance? or subject to type deals, and if you do how? So is there a specific way I market for those types of deals? The answer would be no, I don't. I imagine you could, but I think it would be really expensive, I think, to target like that. I don't think it would necessarily be the most predictable of outcomes as it seems like it might be.

And I think a well-rounded real estate investor would be leaving money on the table doing that. And here's what I mean. when you're marketing, you know, as much as you want to like focus on, say, you know, single family residence, three bed, two bath within two or three mile radius of your primary residents that are owned by absentee owners, that would be pretty focused. Still, just because that's the criteria, it doesn't mean those are going to be people that want to sell your property at a discount. So even when you start focusing in on that and narrowing in on demographics and certain

criteria. At the end of the day, the strategy is the same. You're throwing a bunch of spaghetti against the wall and see what sticks. It's shotgun marketing, right? You're sending out 5,000 postcards hoping to land two or three deals. And just think about those numbers. There's 400,997 of those postcards did not turn into a deal. That was spaghetti that did not stick against the wall. There's just those three postcards that did or those three noodles that did. So my point is you just don't know what you're going to get and you never know what problem that seller on the other end of the line is going to have. So I subscribe to the philosophy of just be ready for anything. Be a well-rounded real estate investor. Have multiple tools in your tool belt or your toolbox and be able to handle anything because

you know, you could market for subject to deals. Properties with high mortgages on them because thinking they might be less, they might be more inclined to do a subject to or there's going to be less competition there. I know people that have done that or thought about doing that. And I just, you know, the information on, on that type of stuff, it's not always the most dependable type of information. And even out of there, you're still going to come across properties that are owned free and clear. And so what are you just not going to turn those down, right? And then you're going to market for properties that are free and clear and you're going to come across great subject to opportunities. So you don't want to turn those down either. So my, my,

advice is just become a well-rounded real estate investor. Be able for, be ready for anything, be ready for a fix and flip, be ready for a wholesale, be ready for a buy and hold, be ready for a lease option, be ready for a subject to, be ready for some sort of creative rap with seller financing or something like that. Just be ready for it. Because whatever opportunity comes your way, you're going to be able to seize that opportunity. And when you're doing this type of marketing, this shotgun marketing, you just never know what you're going to get. And you would like to be able to capitalize on those opportunities, then, you know, even if, you know, you end up wholesaling a deal and that's your main strategy, hey, that wholesaling might have paid for your marketing for the next two months,

right? So you want to be able to do that. So that's my advice. Or the answer to your question is, no, I don't specifically market for those types of deals. And that is why, just be ready for anything and you'll be fine. Okay, you don't have to worry about it so much. Don't overthink it. Josiah Wilson 30 out of Buda, Texas. When you do a seller of finance and have monthly payments, do you use a third party to manage the payments to the seller or do you keep it in house? Good question. Yes, I do use a third party management company to manage the payments. Just like property management, you know, collecting money from tenants, putting tenants in there,

collecting money from tenants or collecting payments from the people that are holding my notes or that are paying my notes. Not the highest and best use of my time. I don't want to be a bill collector. I don't want to do a paper pusher. I don't want to shuffle all that stuff. So I hire a third party company to do that. There's a lot of them out there.

Just go and Google note servicing and you'll find all kinds of options. I think we use note servicing center. That's the name of the company, note servicing center. Their website, I believe, is if you type in note servicing center, their website comes up, but I think the actual domain is sellerloans.com, I think, seller loans. That's who we use, but there's a bunch of different ones out there. All right? So, yeah, I don't know.

I just don't want to be on the phone chasing down payments. I don't want to be doing the accounting and entering that into the books. And I don't want to be shuffling all the paper either. I let somebody else do that. And I think we just pay like 1%. I think it's not even like property management. It's a very, very small percentage. And that's a good exchange for me to have my time back and to do what I want to do.

And that's not pushing paper. All right. So great question. Thank you. Tony Thorin, 42, out of Rosco, Illinois. When you buy a house with seller financing, how do you come up with the interest rate and terms for that deal? Great question, Tony. So when I buy a house for seller financing, how do I come up that price in terms of that interest rate

in terms for the deal? Well, again, here's the answer. It depends. It's a little bit different each time. And it depends on where the sellers heads at, why they're selling. And it depends on where their heads at with regard to the price that they want. You know, you've heard me say to several times that you can make a deal out of everything as long as you can control the price or the terms.

You can control both. Hey, great. But if you can control the price or the terms, you can create a deal. So if I'm going to be working with terms, if I'm trying to come up with an interest rate in terms, that means the seller is probably pretty set on their price. So I need to know with what they want their price. And so, you know, typically, once I know their price or their price range, I'm just going to sit there using the calculator or one of the analyzers in the Epic Pro Academy. I pretty much use the three-option letter of intent calculator for everything. So I'll just play with that and I'll play with the terms.

I'll play with the down payment. I'll play with the interest rate until I come up with an ROI. so I keep messing with those numbers and I watch the ROI how it impacts the return on investment until I find one that's acceptable. I make sure that I play with those terms in a way that it's something that I would be willing to hold if they accepted that option. So like I said, as long as you control the price or the terms, you can create a deal for yourself. And, you know, sometimes it's just not so obvious.

So I just play with it, I guess. It's not very scientific sometimes. So it's just through trial and error, I play with those calculator and I hit refresh. And every time I do that, like a new ROI comes up and I said, does this work? No, just this work. No, that doesn't work. Does this work? Oh, this one works.

So let's just leave it there. Right. And then once I find it there, then I, if I feel based on what the market is paying, like right now the bank's paying 1%, 2%, right? They're not even 2%. They might be paying 1% interest rate on the money that you store there. Or if you're going to go get a loan, a mortgage loan, you know, you can get down to 3,000, and a half you got a really great credit score probably around four four and a half for an investment

property so as long as i know what the market's doing and i know what they could get then you know if i came up in 10 percent i could pay them 10 percent and that still made my numbers work i'm not going to offer 10 percent so i evaluate what the market is doing as well so i'll bring it down to say five or six percent because i know i got i can negotiate all the way up to 10 percent but i'm going to start with much lower to leave myself some room for negotiation so based on first it's the numbers got to work for me The ROI has to meet my minimum deal standards. Then, once I go from there, now based off what I know the market is doing, can I come back even lower and make it more in my favor?

That's my line of thinking. All right? Good question. Greg. Greg Beechy, 50 out of Cedar Rapids, Iowa. Hello, Greg. Good to see it the Epic Intensive. Is there a good strategy for subject two offers where the monthly payments are too high

for good cash flow? Very good. Great question. So what Greg has asked me, when he gets a problem, property that has a mortgage attached to it and the mortgage payment is much higher than or higher than what the property would actually rent for. So if you were to rent the property out, it wouldn't cover the mortgage payment. And we all come across a lot of those types of deals. And the first thing I want to say is just because someone is willing to do that doesn't mean you should take it.

Okay? Just because someone is willing to sign over their property to you and they're so motivated there's like, here, take it. That doesn't mean you should take it. You still have to analyze if you can, if this is going to be, meet your minimum deal standards, if it's going to be a good deal for you. So in this scenario, Greg is asking if that, the monthly payment on the mortgage that is still with the property is if you can't rent that property to cover that mortgage at least, is there a strategy there that you can execute. So the two that come to mind immediately, there may be more, but the two that come to mind right away is even if it won't cash flow, I would analyze it for for its actual value compared to the cops?

You know, are you buying under market value? If you're buying overmarket value and it won't cash flow, probably not a deal. But properties that could have a mortgage higher than what they would rent for, you could still find scenarios where you're purchasing that property under market value. So if that was the case, then, you know, you should be able to sell it to a resident owner. And I would just kind of analyze, well, if it average days on market for something like this, is going to be three months. Can I carry the mortgage for three months before I sell it?

Or can I go sell it? Can I ask the seller to split that mortgage with me until I sell it? Maybe that's an option. Remember, you can get as creative as you want. Or maybe the seller just carries the note until I go find a buyer for it. You could do something like that. So all those things, all those things work. Or, you know, maybe you, the seller carries it for three months and then you carry it for that point moving forward,

splitting it, whatever. Okay? So that's one thing. If you're buying it under market value, can you sell it? And can you sell it in a reasonable amount of time to where it doesn't cost you too much money? You can still profit from it. I would analyze that. Look at the days on market.

So if you have to carry that mortgage, you know, how long is it going to take on average for you to sell it to recoup that mortgage that you're paying for the seller? The second strategy is, if you were to take over that mortgage, could you resell that property with seller financing and say wrap bigger terms around it? You know, even if it won't cash flow with the tenant, it may still cash flow with a resident owner that's purchasing the property. You know, depending on the market, the resident owner is usually willing to pay more than the going rent if it means they're going to work towards homeownership.

So that's the other strategy that I'd be looking at. There may be something else that I'm missing, but because I'm so cash flow focused, I don't get too excited about these types of deals unless I can clearly see the exit strategy before I enter the contract. All righty? So that was fun. Let's do it again. What do you say next week?

Same time, same place. Oh, real quick, before we shut it down today, quick reminder, pre-order the Epic Intensive videos. You can get those right now at 50% off at Epicintensive.com. Okay, so until next week, God bless. And to your success, go to Epicintensive.com and grab those videos for 50% off. Epicintensive.com. And I will see you next week.

I'm Matt Terrio, Living the Dream. Peace. You've been listening to Epic Real Estate Investing, the world's foremost authority on separating the facts from the BS in real estate investing education. If you enjoyed this show, please take a minute to visit iTunes and share your thoughts. Thanks for listening. We'll see you next time here at Epic Real Estate Investing with Matt Terrio. This podcast is a part of the C-Suite Radio Network.

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