Epic Real Estate Investing - EPREI 017 : Real Estate Investing - Getting In and Getting Out

Episode Date: October 28, 2011

Before you get into a real estate transaction, especially if you want it to be a successful one, you must first know how you're getting out. On this episode, Matt discusses multiple acquisition stratgies and the 4 major exit strategies that every real estate investor MUST know. Learn more about your ad choices. Visit megaphone.fm/adchoices

Epic Real Estate Investing Podcast, episode 17. You're about to meet a man that can show you how he took control of his life and financial future and how you can do the same. He's never been on TV. He's not a millionaire, and he does not know Donald Trump. He is a full-time real estate investor, newly discovered author, and family man. He does not report to a boss. He creates his own schedule and takes his family on a few vacations every year. He got started investing in real estate with almost no money in a really crummy credit score.

And he's going to show you exactly how he did it and how he continues to do it. You will have to work. You will have to be responsible. However, laying by the beach sipping fruity drinks is a reasonable goal without further delay. Your guru. Your guide to a better life through real estate investing. Matt Terrio. Hello, and greetings from the epic real estate investing podcast.

This is the place where we'll show you how to create wealth through conventional and creative real estate investing, so you'll have the option to realistically retire in the next 10 years or less, and enjoy the good life while you're still young enough to do so. While you're still young enough to ride the jet ski, while you're still young enough to travel the world, while you're still young enough to play ball with your kids, whatever it may be. Because we know as we get older, things don't work in the way that they used to. My name is Matt Terrio, author, full-time real estate investor and family man. If this is your first time listening to this show, you're going to want to do two things. First, I want you to go back and listen to episode one.

You're going to want to do that. So you can get the gist of what the show is all about and why it's here. I mean, everything that we discussed from this point forward is just going to make so much. much more sense to you if you do that. And two, you're going to want to download the free real estate investing course, how to do deals, no money required. I take all of the mystery out of doing deals with no money. And you can get that at free real estate investing course.com. Okay, today, let's discuss strategy. How do you get into a property? How do you buy it? And how do you get out? How do you sell it? I mean, this is really important to understand because you've all likely heard the expression that you

make your money when you buy real estate. And that is so true. So you need to be good. So you need to be good at at least one acquisition strategy so you can buy right. So you make your money when you buy, but you get paid when you sell. And there's different ways that you can sell. You can sell all at once and get paid in one big swoop and one big chunk through, say, a fix and flip or a wholesale strategy. Or you can sell over time and get paid monthly through renting a property with a holding strategy.

Or you can do a combination of the two, get paid a little bit now, a little bit over time, and get paid a little bit more down the road through. say a lease option strategy. Those are your four basic exit strategies. Fix and flip, wholesale, buy and hold, and lease option. If you want to make money in this business, you've got to get good at least one acquisition strategy. I recommend that you master it.

And if you expect to get paid, you must be good at all of your exit strategies. Now, examples of acquisition strategies are short sales. That's an acquisition strategy. Probate, that's an acquisition strategy. tax deeds and tax liens, those are acquisition strategies, HUD homes, bankruptcy, whether that's through the courthouse or forming relationships with bankruptcy lawyers. And that can easily extend into divorce files as a strategy, like forming relationships with

family law attorneys. That's a great strategy. You can market to absentee owners, notice of defaults, REOs, the real estate owned properties by the bank, foreclosure auctions, distressed homeowners or distressed investors. That's a personal favorite of mine. The MLS. I mean, just buying off the multiple listing service can be an acquisition strategy. My friend Christy, she writes, I don't know, 100 offers a week or so for properties just on the MLS.

I mean, that's certainly a strategy if you want to do that much writing and faxing. And, in fact, I mean, depending on the market, that can be a very good strategy. Internet marketing for distressed sellers has certainly become an acquisition strategy in the last 10 years or so. Or expired listings. I mean, there's a bunch of acquisition strategies out there. And they all have different requirements with regard to time, money, patient, personality, character. I mean, for example, short sales.

It doesn't take much to find a short sale deal. However, I guess that really depends on what part of the country you live in. A short sale is when a property owner owes more on the property than what the property is worth. It's upside down, so to speak. So if you live in an area of the country that hasn't been too affected by the financial implosion in the lagging economy, then, you know, there might not be too many short sales there for you to pursue. But, boy, if you live in California or Arizona or Florida or Nevada, I mean, they're everywhere. I mean, it's hard to walk out the door without tripping on one.

So let's say that's the strategy you're going to choose to acquire your properties. It doesn't take a whole lot of time to work a short sale. I mean, typically once the actual short sale package has been submitted, it might only take a call or two each week to follow up on that file, and then it's a waiting game. But really, it only takes a call or two each week to follow up, and then it's just a simple math equation. multiply how many short sales that you have under contract by, let's say, to be safe, two calls per week. And there's your time commitment. Now, mind you, these aren't regular calls. You could be on hold for up to an hour, certainly been up to an hour and more.

But at the very least, plan 30 to 45 minutes per call. And most of that time you're going to be on hold. So that would be your time commitment for this strategy, for the short sale strategy. And that's when I guess your personality and patience comes into a factor as well. Do you have the patience to sit on hold that long for every call every single week? I mean, do you have the tolerance for shuffling mountains of paperwork? Do you have the tolerance for dealing with total idiots on the phone? Yep, I said it, total idiots on the phone.

I mean, the bank representatives that don't have a clue as to what's going on or how a real estate transaction works. I mean, literally, you can ask the person at the bank a question about your file. I mean, this happens all the time. and you can literally hear the bank rep thumbing through their procedure manual looking up the answer to your question. And you can tell that they're reading the answer. I mean, do you have the patience for that? Do you have the patience for the bank losing your file at least twice through the entire process? And then they tell you that you never sent it.

They say it's your fault. That gets very frustrating. Can you tolerate the banks changing the rules or their company policy every other week? Do you have the brain stamina to try and reason why? with someone that's unreasonable, or even worse, to try to negotiate with someone that couldn't care less if they sold the property or not. I mean, that's impossible, by the way. It's impossible to negotiate with somebody that just doesn't care, with someone that's totally

indifferent. And to top it off, is your financial situation strong enough to wait six months before you actually get your first check? That's how long a typical short sale takes. It might be three months, might be six months, might be nine months, I've had files over 12 months. I mean, maybe you can tell I hate short sales. sales and I've done a ton of them over the last three years but I can't handle it anymore. That strategy, I mean, it's almost drove me to the loony bin and that's why my girl, she processes

all of the files now. She's an absolute saint. She has a great personality and she somehow easily makes friends with all of the bankrupts and to top it off, she has the patience of Job. I'm just not built for short sales. She is, however. And that's a perfect example of how your personality can influence which acquisition strategy you'll be best at.

Now, let's discuss the money situation with the short sale. For a while, I mean, actually for a long while, we had a really good run for, I guess, a little over a year where it was possible to do simultaneous closes and concurrent closes with short sales.

I mean, once the bank approved the discount payoff, we went out and marketed the property. You see, as when you get your approval from the bank, you get what's called equitable interest. And with equitable interest comes certain rights.

And one of those rights is the right to market. the property. So we were marketing the property before we even owned it. And then once we found a buyer, we'd just write up a contract with that buyer, and then we'd turn it into escrow and instruct the closing agent to use the buyer's money to fund our approval with the bank. We obviously sold the property to the buyer at a higher price than the approval price, and we got to keep the difference without ever using our own money. That worked well for a really long time, right in the beginning. And then the banks, they put a halt to that. So then we had to change our approach a little bit, we started using transactional funding, of which we would borrow the money to purchase the property

from the bank first, and we'd only borrow that money anywhere from 24 to 48 hours or so, and that would allow us to close on the A to B transaction with the bank. And then two days later, we'd close the B to C transaction with the buyer. And that worked for a while. In fact, that still works decently for us, but the banks are putting more and more obstacles in the path of the short sale investor that even that isn't as easy as it used to be. I mean, in many cases, the big banks like B of and Chase and Wells Fargo, they're requiring the short-sale investor to hold on to the property

for 30 days before they sell it. And what that does is you have to negotiate a bigger money spread with the bank to compensate for those new money costs. And I really don't even understand how they can force me to hold the property for 30 days before they sell it. I mean, I own the property.

How can they dictate what I do with it? But they try. But then the frustrating part about it is they don't do it every time. I mean, it's hit and miss. And it's hit and miss just in the next. to keep you in the game because it is profitable, but it's frustrating as hell.

I mean, last month, we had three short sale deals with the same bank, but we were assigned to three different loss mitigators. They're the ones that negotiate the short sales on the bank's behalf. So we have three files with the same bank, and because we had three different loss mitigators at the same bank, we had three entirely different experiences, and we were forced to play by three different sets of rules. I mean, it's like the government, they have their rules, right? You got the laws that you've got to abide by.

Then the DRE, the Department of Real Estate, they impose their own set of rules. And then the banks, they have their rules. They have got their company policy. And now it seems each individual loss mitigator has their own set of rules that they impose on the deal as well. And what it really all boils down to is, the banks just don't need to sell right now.

I mean, they may want to sell, but they don't need to sell. You see, the banks that are still in existence received their bailout money years ago from the government. So that really saved them from the massive losses they would have incurred without the bailout money, I mean, if it didn't wipe out their debt and losses entirely. But then, the banks were allowed to claim on a loss on their taxes anyway. I mean, even after the bailout saved them from their losses. So they got to claim a loss with the IRS of which they didn't lose. They were bailed out.

So they're sitting on mountains of free and clear real estate right now, which they're in no rush to get rid of. I mean, it's almost a 100% profit to them. So I'm sure you can tell that this is a serious sore spot for me. I mean, mostly because they dramatically cut back on the amount of deals they're approving. And they've cut way back on the amount of equity they're letting go with each deal that they do approve.

I mean, the government, they got bailed out. But the buck, I guess, it just stops with them. The bailout wasn't intended for the people, I guess. The buck stopped with them with regard to the relief trickling down. In fact, it actually never really trickled. The banks just damned it up. The small businessman didn't get to see a penny of it. Or maybe we did for a hot second,

but once they figured it out that we were actually making a small profit and were able to feed our families during these trying times and we were able to pay our bills, they decided to put a stop to it. Now, if you can deal with all of that, I mean, knock yourself out. Short sales, go for it. I mean, if it weren't for my girl,

I would not be doing short sales at all anymore, but we still get enough approvals to where it is worth our time. It's just not worth my sanity, so she handles it. Now, I don't know how much of everything I just said is true, because I didn't hear that from anybody. I didn't read it anywhere. I've witnessed this from the outside looking in. I'm on the front lines.

I mean, that's a consolidation of the last three years of short sale experience that I gathered from being in the game, from being on the court, and playing that game. And actually, I didn't intend to make this podcast on short sale. bashing but what you'll want to get out of this is that every strategy has its pros and cons with regard to an investor's time to an investor's money and to an investor's personality. For example, take probate as an acquisition strategy. My friend Chris, he's a master at probate and a couple hours a day, he goes on down to the courthouse, he thumbs through the probate files and he reads them and decides if there's a deal

or not. Now, I don't know if you've ever done that. You might want to try it just for the exception. But if you go down there and you read through those files, there's not a little flag sticking out of the file anywhere that says, hey, there's a deal right here. It takes time to learn what those documents are saying. And it takes time to discern whether there's a deal, whether it's worthy of your time to pursue or not. Now, he is a master at this. And because he's a master, he's essentially eliminated all of his competition, very much of it. I mean, he finds deals where no one else can find them just because he knows what he's looking at, because he's invested his time, and he's gotten educated on

what to look for. And on a school teacher's salary, through this strategy, he has created a real estate portfolio of over 200 cash flowing properties. It's pretty amazing. But if you don't have the personality or the character that has the patience to go down to the courthouse every day for two to three hours a day and look through files, then the probate's probably not going to be an acquisition strategy for you. Another example, tax deeds as an acquisition strategy.

I mean, I took a class on this strategy because it just sounded too darn good. And if you don't know what that strategy is, each county will hold an auction on properties that are delinquent in their property taxes. And they'll auction the property off just for the amount of the taxes that are overdue. So if someone didn't pay their taxes for a couple years and all they owe is $4,000 in property taxes, that's where they basically start the auction, is it $4,000. But when I heard about that, I was like, wow, even if they, doubled or tripled or quadrupled that price, it would still be an awesome deal.

So I took a class on that strategy, and coincidentally, it was just about the time when the tax deed auction was coming up in my county in Los Angeles. This was a few years ago. I went down, I registered for the auction, I put down a $5,000 deposit, and they gave me a giant book. I bet the book was probably two inches thick, filled with all of the properties that were going to be auctioned off. And I started looking through them, and, you know, I was like, wow, this one's only $5,000. The auction here starts $10,000. The auction on this only starts for $500. I mean, I'm looking at this. Like, who wouldn't pay an overdue tax bill for $500 to save their home? But, hey, they were there, and I started going through them. And I brought a couple

friends along with me, and we created some guidelines of how we were going to identify which properties we were going to bid on. So we tore the book into like four parts, and we each started analyzing the property. And we started making a list, putting a little star next to the ones that met our criteria. And once we were all done, we, We had narrowed down that list of that two-inch book filled with properties. There were probably five, I don't know, I can't really remember it, but there were multiple properties on each page. There's probably 10 properties per page.

And we went through that entire list. It took us about a week to do so, working non-stop, and we reduced that to a list of about 150 properties, of which met our criteria. We were going to flip these properties. So if we could purchase the property with at least $50,000 of equity, then we were going to bid on that property. and we made a oath to each other that we weren't going to bid one penny over that price. We wanted to always maintain $50,000 of equity in each property.

And it seemed like really easy to do, especially when a property's auction price is starting at $5,000 or $10,000. I mean, we're in Southern California. Properties here sell for $2,000, $400,000. Starting at that price, it seems like creating an equity position of $50,000 would be pretty darn easy. So we reduced it down to about 150 properties, and then over the next couple weekends,

we drove the properties and further reduced that list. And we reduced it down to a list of about 60 properties. So now we've got 60 properties. And then what we needed to do, and I think with this auction, we only needed 10% down to take ownership of the property, and then we had 30 days to close. So I was thinking about my short sale strategy.

Okay, this is going to be easy. Put 10% down, get it under contract, and then find a buyer fort and close within 30 days. Easy. So the date came up and we started probably three months out ahead of the actual auction date. That date came up. We went down. We marched down.

There was five of us, I believe. We marched down to the auction. There was a big giant auditorium. And we walked in and there were probably at least a thousand people sitting down, waiting for the auction and bidding on property. And we just kind of looked at each other like, oh, I guess we've got some competition. But that's okay. We've got 60 properties and all we need to do is get 20 of these properties. We only need to win 20 of these properties. And if we'd get 20, we can essentially

create a million dollars in 30 days. 50 grand of equity times 20. We're going to create a million dollars within 30 days. So we were excited. So they gave us this little brochure of the properties that were coming up for auction. So we started going through to see when our properties were coming up for auction. And we started going through and going through and we got to one property and it said that it was pulled from the auction, that the homeowner had paid their taxes on time to save their property. We're like, okay, when we went to the next one, same story. The property owner paid the taxes and they pulled it from the auction. We went through again, same story, same story. We've gone through like 10 properties and none of those first 10 are actually going to be auctioned off

that day. So now we're getting a little concerned. We went through the whole thing. Out of the 60 properties that we were going to bid on, only four of them were left in the auction. And we looked to each other like, wow. But hey, $50,000 of equity times four properties, that's still not a bad month, even if we had to divide it by five times. So that was a dose of reality that kind of came up and slapped us against the head that, hey, we did all this work for months and months and months and we only got a shot at four properties. So we sat around patiently, got a hot dog and a soda, and waited for our number to come up. And by the way, while we were waiting, we're watching all these other properties that people are bidding on. You know, and there's

like one person, two people bid against each other, and the property just goes for ridiculously nothing. Then next thing comes up, maybe two or three people get involved. Then another property and nobody bids on it at all. I mean, it might have been a thousand dollar property and no one bid on it. So we're watching and there's not a whole lot of competition for each property that's coming up. So we see our number coming up in the auction and we're getting ready. Okay, this is our moment. We all had our number, so we're ready to hold the number up so the auctioneer could see our bid. And our property came up and I'm going to start the bid at $5,000. And every single hand in the auditorium shot up in the air.

It was the first property. Our first property that we bid on, it was the first property we saw more than two or three hands bid on that property. It was amazing. And that thing went from $5,000 to $10,000 to $20,000 to $50,000 to $100,000 to $400,000, really in a matter of, I don't know, 30 seconds. And we looked at each other like, well, gosh, we were supposed to stop bidding. about $100,000 ago.

And when it was all done, the person that won the property, I bet very conservatively, perhaps more, but very conservatively, they bid probably $50,000 over retail on that property. It was insane. Like, how are they going to make any money on it? I guess they're just going into live in it. Who knows? But that's how the first one went.

And then the second property came up when it was the same story. The third property came up was the same story. The fourth property came up, same story. So we walked out of there with nothing. We had almost four months of time invested in research and walked out of that auction with nothing. And I went back and reported to the person that taught the class that we took. I reported to them what had happened.

And she was a very successful, Brittany. She was a very successful tax deed investor. I was like, how does this strategy work? This is what we did. We did exactly what you told us to do. We did this, did that. And we went down there. And she said, you know what?

Some markets are just like that. And I was like, is that it? And she goes, I don't know what happened, but, you know, my friend Lisa went down and and she got four properties from that auction. I was like, really? How did she do that? Well, Lisa's an expert at tax deductions. She knew how to work the system.

She actually purchased those properties because she became an expert, because she was experienced, because she dedicated and mastered one acquisition strategy, she makes a profit at every tax deduction. killing because she learned how to get the properties before they went to auction. And here we are in this giant room of a thousand people, a bunch of imbeciles that are all chasing their dreams and trying to get rich at tax deed auctions and competing against each other. And she didn't actually go to the auction. She got all of the properties before they went to auction. And maybe perhaps we can get to later on how she actually did that. But the point I'm trying to make here is

she mastered an acquisition strategy. And because she mastered an acquisition strategy, and because she mastered an acquisition strategy, she eliminated her competition. She didn't have to step into that room with those thousand people and compete. Just like my friend Chris, it doesn't have to compete with all the other people direct mailing probate. No, he goes down to the courthouse, goes through the files, finds out which ones are the deals, and knows how to acquire that property above and beyond what so many people are out there doing with their direct mail campaigns.

I mean, each strategy has its pros and cons. You're going to have to take the good with the bad, and you're going to just have to pick one. And I recommend, as I've illustrated a few examples, that you just master one, master whichever one that you pick. You know, and I'm going to have many guests on this show sharing their strategy and how they succeed at their strategy. And I'm not going to pretend to know it all and try to teach you every single strategy out there. I mean, that would be silly, as well as a very big disservice to you. I mean, for example, I've never bought or sold a seller finance note. But I had one of the top note investors in the United States on the show last episode to share with you how it.

he does that. And I have a pretty deep network with regard to successful investors, and they run the entire spectrum of strategies, and I'll continue to have them on to share their perspectives and their tips. So once you actually pick your strategy, study it and become a master at it before you adopt a second strategy. I consider myself a short sale expert. I've made a lot of money with that acquisition strategy, but it's really tough to get any sort of traction or momentum going in the current banking conditions. I mean, if you are an expert marksman with a rifle, but the guy at the end of the line kept moving the target, or even worse, changing the target without even telling you what the target was, I mean, how could you hit your target? Even if you were an expert. So I've decided

to become an expert at acquiring property through distressed property owners, and whether that's homeowners or investors. I mean, if you're in a jam and you need to get rid of your property, you need a way out. For the last year, that's been my focus. That's who I've been looking for. and I've become somewhat of an expert on creating win-win-win seller finance deals. I like to think of myself as an expert, but I know there's still so much more that I can learn. But I've done very well with seller finance deals. I've done very well with all-inclusive deeds of trust, and I've done very well using other people's money to build my portfolio.

And that's actually what I'm putting together inside of my Epic Pro Academy, of which is scheduled for a November 15th launch. That's my shameless plug, by the way, and more shameless plugs to come. Epic Pro Academy. And if you want some more information on that, you can go to Epicproacademy.com. All right.

So I'm executing these types of deals on a regular basis. That's where I decided to commit. And that's where I've decided to hone my skills. That works for me. And it might not work for you. I mean, perhaps you've got a bunch of cash and you can go down to the courthouse steps and bid at the auction.

That might be a strategy that works for you. That doesn't work for me. And you're going to find with each strategy, the less money that it takes to execute that strategy, the more time it takes. And those two factors, they just seem to work together. They seem to be finally correlated. I mean, if you've got a bunch of money,

it's not going to take you much time to build your real estate portfolio. I mean, just hit the multiple listing service with your real estate agent and start making offers. I mean, you should be done in no time. Or if you find yourself strapped for cash, you're going to have to get really good with the time part, meaning you're going to have to really hone your skills

and practice your techniques. That's why education is so important. It compensates for the lack of cash because all the time in the world really just has no value inside of real estate investing unless you know what to do with that time. So pick one acquisition strategy and master it. That's how you're going to make your money. Now, having said that, you also need to learn the four basic exit strategies, fix and flip, wholesaling, buy and hold, and lease option. And you'll need to understand how each one of those strategies are going to affect your acquisition. price. You see, you've got to know how you're going to get out before you get in. For example,

if your intent is to fix and flip as your exit strategy, when you buy, you're going to be very concerned with, you're going to want to pay attention to what the after repair value is, what will be the retail price that you'll be able to sell it for. So while you're analyzing your property, you're going to want to start with the retail price, the after repair of value. I mean, all of your math starts there and then you work your way back. That retail price, have a dramatic impact on what you're able to purchase the property for and still make a profit. Or if you intend to buy and hold, the fair market value or retail price probably isn't going to be so much of a concern for you. You're going to be more concerned with how much you'll be able to

rent the property for. And will that rent be greater than the amount that you have to borrow? And will you be happy with that return? So I really don't care as much what the comparable market analysis for solds in the area says. I mean, I'm not going to ignore that information completely, but it's not my primary concern. The return on my investment is my concern. For example, I own four properties in Illinois of which I know I paid more than market value for. I was completely aware of that when it happened.

I had no problem with it, though, because the cash on cash return was 27%. And after the tax deductions and the depreciation, my total return is 40%. I'm okay overspending in a hold situation if the return on my investment is going to be 40%. I mean, maybe you're not okay with that, but I am. I mean, and I'll do that deal all day long.

You know how fast you'll get out of the rat race with that type of deal? You know how fast you can get out of the rat race for overpaying for property in that situation? At 40% return on your investment? I mean, if you want to go down to ING, the large financial institution, and open up a savings account at 0.85% annual percentage, go ahead. I mean, you know your situation much better than I do. You know inflation is around 3.5% right? I mean, you're actually losing money in that bank account.

Anyway, I'm sure you know that. I'm sure I'm preaching to the choir here, but that's why I love real estate. I mean, there's no other investment vehicle out there that gives you that type of control. Love it. But control comes to you by way of education. And when you become a master of an acquisition strategy

and get very well versed with your exit strategies, you will have that type of control over your finances, over your investments. You'll have that type of control over your future. I mean, so much so that you can virtually eliminate the risk. When you start to master your acquisition strategy and master your exit strategies, you can virtually eliminate the risk. I mean, there's always risk.

So be careful if someone says there's no risk, there's always risk. But you can virtually eliminate it. You can mitigate it so low that there's really nothing to be scared of. For example, last example of the day, I mentioned a couple of episodes ago how I just picked up my first California property to hold, and I did it through 100% seller financing. Not a whole lot of risk there, right? The owner called me from one of my yellow letters, and she was somewhat abrasive at first,

and I answered the phone. I was like, hello? And she said, I got this yellow letter from you stating you want to buy my fourplex. How much are you going to give me for it? That was her attitude. And I asked, well, how much do you want? And she had said, $340,000. I then asked, well, how much do you owe on it?

And she said she owned it free and clear. And in my head, I'm thinking, and then I asked, well, if I were able to give you $340,000, how soon would you be ready to sell it? And she said right away. I said, great. So I told her, I purchased property in two different ways. And here's a tip for you, by the way.

You might want to write this one down. I mean, this sentence has made me a small fortune. It's my favorite line to say to motivated sellers. I said, I purchase property in two different ways. I'll give you all cash at my price, or I'll give you your price on my terms. Which one would you like to do? So she asked me, what is my all cash price? And I was like, 50% of $340,000.

I'll give you $170,000 within seven days. And she told me I was crazy, understandably. And then she asked me, well, what are your terms on the other option? and I said, well, I'll give you your price of $340,000, but I want an all-princi-dollar, amortized over 40 years with a balloon payment due in 10 years, and I want a six-month moratorium on the first payment. And she said deal. So, real quick, let me explain what this deal had to do with my acquisition strategy and exit strategy. My acquisition strategy is that of marketing to distressed property owners within a five-mile radius of my own personal residence. That's my primary strategy and approach.

I've been doing this long enough that two types of people call off those yellow letters. The first is, are those that are curious because they've never seen anything like this hit their mailbox before. And that's most of the calls I receive. I mean, they're junk calls. That's mostly what I get. They're not calling to really sell the house. They're just curious as to how much I'm going to pay them for it. And the second type of call that I get are from people genuinely in a bind that are looking for a solution.

And knowing that, I've got a few basic questions that I ask that essentially source. these two people right away. I know which one you are. But, you know, she was so blunt, so fast on the phone, I just responded bluntly back to her. I purchased property in two different ways. I'll give you all cash at my price, or I'll give you your price on my terms. Which one would you like to do? Now, there's a lot of flexibility in my terms, but those are essentially my dream terms. That's why I like to start, especially if I'm pressed for an answer. They're my dream terms because I know my market and I know my exit strategies. If she accepts my first option of 50 cents on the dollar, I mean, even if she had grossly

overestimated her property's value, I still know that if she took that option, there's a pretty good chance I'll be able to flip it for a very healthy profit. Now, if she accepted my second option, and that's always what I hope they go for, by the way, is I prefer to hold and cash flow property. That's where I'm headed. I want that passive income. So I hope they choose that option. Because with this option, I know paying full market value.

amortized over 40 years that there's probably not going to be too much problem and me cash flowing just about any property in my area at the moment. And since this was a fourplex, I mean, there really was no doubt in my mind that this thing was going to be a cash flowing beast if she accepted that option. I was probably going to cash flow quite a bit.

Now, I threw in a couple extra terms. I threw in a principal-only loan so that 100% of my monthly payments go to debt paydown, of which at the end of a 10-year period, I will have paid off with the ridiculously low payment because it's amortized over 40 years, so the payment's small. But with that ridiculously low payment,

I'll have paid off approximately 40% of the property's value. And that's if the value stayed at exactly what it is today. Now, that's serious wealth creation there. By just inserting that one term, that principal-only loan, I'm not paying interest. All of my payments go to the principal, and it pays it down. and because it does, it creates a massive amount of equity really fast. So that's serious wealth creation there.

I inserting that one term. And it's not me that's making the payments. It's my tenants. They're creating 40% of my equity for me through their rental payments, which I really think is my worst-case scenario. And even if the entire market goes to crap and never recovers, I still cash flowed the entire 10-year period. But I don't really think that's going to happen here in California over the next 10 years.

in my opinion, we're only going up. At what pace, I don't know. But it's going up in 10 years. I'm confident in that. I mean, it might dip a little bit before it goes back up, but I'm confident that it's going to go back up. The second term I put in place was a six-month moratorium on my payments of which I don't have to make any payments.

That's what that means. I don't have to make any payments for the first six months. And what that does is it allows me to build a reserve to properly and responsibly manage the property. And I did all of this without one dime of my own money. Well, I did have to pay a few grand in escrow fees, transfer taxes and insurance. But sheesh, with that deal, if you couldn't go out and find a few grand to close this, I don't know what to tell you.

I mean, the first month's rent alone is a little over $3,000. That right there pays for my closing costs. And I don't have to make any more payments for the following five months. The point here is when you commit to mastering your acquisition strategy and you understand your exit strategies, the sky is the limit. That's why I end my podcast with Living the Dream. It's really amazing once you've chosen

to master your acquisition strategy, once you become really competent at it and understand your exit strategies. I made a commitment to myself to mastering, and to master creative deal structuring. What are you going to commit to? It's your choice. And if you got nothing from today,

what you want to get is just choose, stick with what you choose, never stop investing in your education, and don't give up. Then, all of the time and money, freedom that real estate investing can provide is going to be yours for the taking. You're going to have an amazing amount of control over your current situation and your future. And not just your future, your children's future and your children's children's future. And that's what's available for you. I mean, that's why we're here, isn't it?

That's it for today. And until next time, as a very wise person once said, commitment unlocks the doors of imagination, allows vision, and gives us the right stuff to turn our dreams into reality. To your success, I'm Matt Terrio, living the dream. Thank you for spending this time with Matt Terrio and the epic real estate investing podcast. When you have a moment, stop by iTunes to leave your comments and let us know what you think of the show. And if you haven't done so already, get started investing today by visiting free real estate

investing course.com to access Matt's free course, how to do deals, no money required. Until next time, to your success. To your success. This podcast is a part of the C-Suite Radio Network. For more top business podcasts, visit c-sweetradio.com. Thank you.