Epic Real Estate Investing - EPREI 029 : Investing in Real Estate with No Money

Episode Date: April 5, 2012

The lack of money and credit when investing in real estate is considered by many to be a significant disadvantage, but is it? Is it a career ending crisis? Or is it a future of opportunity? While the cynics will unanimously agree that investing in real estate with no money is indeed a disadvantage, after this episode you may believe... in the words of Robert Kiyosaki... it is your 'unfair' advantage. Download Matt's free real estate investing course at FreeRealEstateInvestingCourse.com Mentioned in this episode: CashflowSavvy.com - Guaranteed Cashflowing Properties EpicProAcademy.com - Free Training on the 3 Principles to Prosperity that got me out of the "rat race" in just eleven months. Learn more about your ad choices. Visit megaphone.fm/adchoices

Epic Real Estate Investing Podcast, episode 29. Without further delay. Your guru. Sorry. Your guide to a better life through real estate investing. Matt Terrio. Hello, and greetings from the Epic Real Estate Investing podcast, the podcast that will show you how to build wealth through 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. My name is Matt Terrio, author of Full Time Real Estate Investor and Family Man. Now, if this is your first time listening to this show, I want to welcome you personally, but you're going to want to do two things. One, you want to go back and listen to Episode 1 for the ground rules of the show. And two, you're going to want to download the free real estate investing course, how to do deals, no money required.

And you can get that at free Real Estate Investing. course.com. Very unique creative name, right? Free real estate investing course.com. It's a step-by-step course of where I unveil the mystery around doing deals with no money or credit. Finally, right? Okay. So I've been away for a while. I missed you guys. But I am back and the show will be back on schedule effective immediately. Probably going to pick up the pace a little bit as well. Maybe like, I don't know, maybe like three episodes every two weeks instead of just one a week. I haven't quite figured out yet. I definitely want to do more. Just, I enjoy this part of my day, and I've missed it. And so I want to just record more, produce more for you.

Also, if you noticed, I threw in a little short episode titled, The Epic Pro Quit Tip, that was the download just before this, the episode just before this. And I'm going to continue to do those also. I've got some great feedback from that. And it's really funny how polarized the audiences. I mean, some people like the long podcast, and some people love the short and quick to the point ones. So I'll keep mixing it up. And let's see, I got a few announcements. Some new development since last episode.

First, my Memphis rehab, it's complete. And we're putting the first five tenants in at the end of this week. That's only a couple days away. And also, well, to bring everyone up to speed, I guess, I purchased a 14-unit building in Memphis in January. And it was completely uninhabitable. It was a total mess. But I got a smoking deal, a really smoking deal.

And I haven't revealed the numbers yet, because I just couldn't believe it. I didn't want to jinx it. But since we've got tenants moving in now, and as soon as they get settled, I'll go ahead and I'll post all the details of the deal on the Epic Professionals website. So you'll look out for that.

I'll let you know when that's up. And then you can see how you can actually buy a multifamily building using $0 of your own money, and you can still cash flow a couple thousand dollars a month. That's what this has turned out to be, and just a sweet deal. I'm excited, and I'm actually a little bit proud of this one too. Got another one,

an 18 unit, basically right next door that we're probably going to do as well. So the future is bright. Also, while I've been away, I've created a connection in Memphis to acquire rehab and place tenants creating 16 to 20%

cash on cash returns with absolutely no debt. And it's basically just a one-stop shop, if you will. And, you know, I know there's really nothing special about this because there's a lot of people already doing this, especially in that area. You know, Memphis This is a really hot market right now. Just since January.

I mean, the spring has been on fire in Memphis. But I did come up with a unique selling proposition, which I think allows us to stand out a bit. We're doing something that I've never heard another company like us do. We're guaranteeing, guaranteeing the property's cash flow for the first year. Yep, for example, if you purchased one of these properties and your tenant moved out on month six, I'd pick up the slack and I'd make sure you still get your cash flow.

I mean, the most I've ever seen anyone offer on something like this is like four months. And then there's all kinds of disclaimers and fine print on how you're supposed to recoup that or get that guarantee to cash in that guarantee. I mean, don't you get annoyed when you see an awesome headline of like the guaranteed type cash flow? And then they have this little asterisk next to it, noting that there's fine print below and you better read that for the details. I hate that. So I'm not doing that. I'm guaranteeing the cash flow for one year from the close of escrow.

30 days from the close of escrow, you'll start receiving cash flow. There's no fine print. I'm just going to make it very simple. It is what it is. Property management, free for the first year also. That's awesome too, right? And it gets better. The rehab comes with 100% guarantee for the first year also.

So these properties should have very little or any maintenance costs the first year. So why would I make such a bold guarantee? Am I out of my mind? Some people think so. But as I've mentioned on this show before, you know, the two places where investors typically get stung, where they lose money, is in either a bad rehab team and or bad property management.

So I'm making such bold guarantees because I've done my homework. I did the due diligence for my clients. And I got a top-notch rehab team, and I got a top-notch management team. And how do I know their top-notch? Well, they just finished crushing it. I mean, they absolutely crushed it for me with my project, and they're starting another one for me right now.

And also because I'm giving them work in volume, I'm getting great pricing. And I'm not taking the discount. I'm passing it on to my clients. And my clients, they're just going to benefit from the volume that I'm doing there, not me. They're going to benefit. And lastly, I put my incentive in the right place,

meaning the better we perform for our clients, the more money we make. So if I do better, I make more money, but if I do better, my client makes more money as well. So it puts us on the same team. So this structure with all these guarantees in place just puts us both on the same team. It puts us on the same side. I think it's a good way to do business.

So I did that intentionally. So if you're intrigued and you want some more information on that, go to cashflow savvy. com. Cashflow savvy. com. And savvy has two these in it. And there you can download a little information packet and I don't know, who knows, Maybe you and I will have properties right next door to each other.

Okay, now, final announcement. Well, final announcement for today. And then we'll get to the meet of the show. The Epic Pro Academy is back open. It's been closed for several months as I've been finishing up the lessons, trying to stay one step ahead of the members. And thankfully, I've completed that. And also, I've put together a free training on the homepage of the Academy as well.

It's a free training, webinar style, and you can go to the homepage and register, of which I conduct several times. a week, this webinar several times a week, the training is titled three principles to prosperity, and they are the three very principles that I committed to about 23 months ago. And in just 12 months from then, I successfully got my butt out of the rat race. I got my cash flow to exceed my monthly expenses. It's something I had been unable to do for the 20 years prior. And so I share with you in this training how I was able to do it so fast. And you can register for that for

free at Epicproacademy.com. A lot of websites today. But I haven't been here for a while, so there's a lot of news to share. So I think that's it. Let's see, while I was taking a break, I received a lot of emails. The correspondence is ramping up, so the free real estate investing course, it inspires a lot of questions, so I'm happy to answer all of those. And I think I've responded to just about all of them.

But there was one in particular from a Mr. Joseph Turley out of Utah, and he sent me a really cool and timely email. And that's a long email, so I'll read it to you, but I'm going to edit it a bit. Joseph writes Matt. I can echo sentiments from others who have felt the same way I have about the information you've provided. It is indeed refreshing to hear from someone who isn't trying to make a fortune off of every piece of information on real estate.

Your direct approach and not charging for much of your material is a pleasant change from the typical guru strategy. My somewhat unique question for you is, how would you tailor all of this for someone who isn't broke and has an 800 plus credit score. So much of the draw to people in real estate is trying to make money with no money, bad credit, and get rich quick. I'm none of those three and have wondered how the picture changes or if you'd recommend an alternative approach for people who have cash up front.

What are your thoughts? So that's what Joseph wrote and it was very timely message for me. It was a timely email. It really stood out. It hit me at the right time. And it hit me at the right time for two reasons. first because I was thinking somewhat of the exact same thing just the night before I received the email.

I was thinking how the majority of my broadcasts and lessons are around doing deals with no money. And I was just thinking the night before, how is the audience who has money, how are they perceiving this information? And I'll touch on that in just a second. And the second reason it was timely, this email was timely,

was because the very next day I was actually scheduled to be in Utah of all places. So Joseph and I hooked up the following day and talked real estate over a beer and hot wings. And by the way, if you happen to ever be in the L.A. area and you want to connect and talk shop, I can be easily bribed with hot wings and beer. All right. So the topic of discussion, among other things, but the topic of discussion was regarding his question, how does the picture change or the approach for people who have cash to invest?

So first, you know, creating so much content around investing in real estate with no money wasn't really or isn't necessarily directed at people with no money. It's for everybody. And it's really more about using your noodle, using your brain and thinking your way through deals to maximize your returns, to be a shopper rather than a buyer of real estate, to be a creative thinker rather than a conventional one. And this is the way that I conduct my business. And since I got started using none of my own money or credit, because I didn't have any,

I just got used to doing it that way. And I got addicted to my infinite returns. Don't get me wrong. I mean, there's nothing wrong with 10, 15, 20% returns. Those are awesome. I just prefer infinite. And the more of your own money that you use, the lower your returns get. So I'm not opposed to using my own money.

I just don't do it unless I have to. and you know I really doubt that I would change much about my approach or what I do with regard to finding deals if I had an abundance of funds and credit. I mean, for sure, I would hold more and I would flip less, but I'm at a point where I'm already flipping a lot less.

I'm flipping less and less by the month seemingly. And I would definitely use as much of my credit as possible. I mean, we have all-time low interest rates. rates. And I don't know how much longer they're going to last. They'll probably last for a while, but I mean, if I had a great credit score, I would take full advantage of the interest rates to create more cash flow for myself. So I would definitely leverage as much as possible in long-term low-interest loans and looking for deals that would produce at least a minimum 33% cash-on-cash return. And I like that number, 33%. I like it because it means after year,

three, I've made all my money back. And I've really got nothing to lose and I've got everything to gain. I mean, everything from that point forward is 100% profit. So 33% that's just kind of my magic number. I mean, everyone has their own personal preference. Maybe yours is higher, maybe yours is lower. Certainly, there's nothing wrong with a 25% return. That's better than darn anything else that you can get out there. But 33%, that's just kind of my magic number. And I would then commit my cash flow. I would take the cash flow from these investments. And I would commit that to paying down the debt of my highest grossing properties, one at a time. And then I would refinance every chance that I had so I could purchase more property,

keeping my overall portfolio's internal rate of return between, say, 20 and 30%. That's what I would do if I had an abundance of money and credit. I would still use as little money as possible. That wouldn't change much. but I would leverage my credit score as much as I possibly could to get long-term low-interest loans. And I would look for 33% cash-on-cash, just my magic number. And then once I was, it acquired as much as I possibly could,

and I was holding on to it, I would start taking my cash flow and commit it to paying down the debt of my highest grossing properties. So that's what I would do. And, you know, because just the prize at the end of the day is cash flow. And if you don't have to flip properties to create cash first before creating cash flow, then why do it? I mean, unless you enjoy it, of course.

But, you know, that's just really my philosophy. Flipping houses is work. It's hard work. It's stressful work. And it can be a lot of fun, but it's never without the stress. Maybe, you know, you get a thrill out of the stress. I don't know. I've had enough of it to where I'm kind of over it.

I mean, everyone should have the experience at least once. But no one will achieve financial freedom. flipping properties. Believe that. No one will achieve financial freedom flipping properties. Flipping is simply a means to the end. It's to create cash and then to take that cash and convert it into cash flow. That's where the freedom comes in. That's where the freedom comes from. That's where you actually have financial freedom. It's not just this mythical word or this mythical concept. Cash flow. That's where the financial freedom comes from. And, you know, that's my position. But who I guess if you ask 10 other investors, you'd probably get 10 different answers, but that's where

I'm coming from. Now, having said that, I think everyone should force themselves to invest in real estate with no money. And it shouldn't matter whether you have money to invest or not. You see, most people think that you'd be at a disadvantage investing in real estate with no money. But it's not necessarily true. In fact, I don't think there's very much truth in there at all. I mean, the disadvantage really comes from being a novice, being inexperienced, being uneducated.

It has nothing to do with your money or lack thereof. I mean, don't get me wrong, money can certainly offer advantages in real estate investing. But I don't think it's a big disadvantage to not have it, especially in the beginning of your investing career. And it's definitely not the make or break aspect of the business that the cynics and the pessimists and the dream stealers or the, hey, I'm just keeping it real. people think that it is. In fact, you should go to great lengths in avoiding using your own money to invest in real estate. And besides the obvious, here's why. You see, by forcing yourself to be creative and use as little money as possible, invaluable skill sets of creative real estate investing, they're going to develop for you. They're going to develop that in a way that they otherwise

might not. Actually, they almost definitely will not. I mean, they won't develop because you, You won't use them. You won't have to. And you're just going to end up using your money as a crutch. You're going to use your money to bail you out of bad deals. You'll use your money to compensate for bad decisions and bad negotiations. And if too much of that goes on, you know, you probably aren't going to be around very long. Well, I guess it depends on how much money you've got to lose.

But, you know, if you go through that, you're going to, your money, the mistakes aren't going to be as noticeable. because you'll always be able to save yourself. You see, by investing in the proper education and then forcing yourself to do deals with no money and no traditional or conventional financing, going out there implementing what you've learned and getting real-world experience, you're going to develop invaluable skills

that you will not learn anywhere else. And there are skills that will pay you. These skills will pay you tenfold, if not 100-fold over your real estate investing career. I mean, here's some examples. First, your lead generation skills. Your success in investing in real estate will be in direct proportion to your ability to generate leads.

I mean, the quality of your leads, as we've mentioned, will be in the quantity of them. Now, money, that can buy lots of leads. But when you are forced to generate just as many leads as the investor who has a budget for it, you get really good at generating leads with no money. And here's what you're going to find out when you start generating leads with no money.

As many investors, they'll agree to the fact as well. Typically, the leads that come for free are generally the better leads. You get that? The leads that come for free are generally the better leads. A lot of people try to buy their way into this business, and they buy their way into this business with doing big, giant marketing campaigns. And that's what most people do. and if you do what most people do,

you're going to get what most people got. And that's like didly squat, really. Right? I mean, look around you. Look at what most people got. But the people that are really excelling and the people that succeed in the long term are the ones that figured out

how to generate their leads for free. And because those leads that are free are better leads, they typically end up in a better position down the road. I mean, think about that. You know, you spend a bunch of money, say, on a billboard, $5,000 a month, or you go out to the real estate clubs

and you go out to your community and you have lunch and coffee with the real estate industry professionals and you create this amazing network, where are your better leads going to come from? A $5,000 billboard or a giant network of people that you have a personal relationship with.

Something to think about. Okay? Second, your people skills, that's another. I mean, every piece of real estate that you ever buy or sell will be from or to another person. It's a people business, and if you have poor people skills, your experience investing in real estate will be poor. I mean, money, it can compensate for poor people skills. But when you are forced to do a deal using no money and your livelihood depends on it, your people skills develop really fast. So your people skills is another one.

Third, your negotiating skills. Now, your job as a real estate investor is to buy low and sell high. And the better you are at buying low and selling high, the more money you're going to make. I mean, money can always cover up or bail you out of a bad negotiation. But again, when you are forced to buy real estate with no money, let alone buy it low enough to create a profit, your negotiating skills will develop in a way that will be impossible in any other way.

And here's why. Because there's a saying. The saying is necessity is the mother of invention. When you have to make it happen and you've got no money to make it happen with, you get creative. Your brain starts working in a way that it would never be called upon to do. So your negotiating skills going to develop far greater, far faster, and be much better when you get started with no money.

Fourth, your money-raising skills. You know, Robert Kiyosaki, the author of Rich Dad, Poor Dad, everyone's favorite book or the book that started it all for so many people. Robert Kiyosaki is on record in many different forums stating that the number one skill of an investor in today's economy is their ability to raise capital. And if you have money to invest in real estate, you don't need that skill, right? Why would you ever need to develop that skill if you had money to invest in real estate? Well, when you are forced to invest in real estate with no money,

you must learn how to raise money. The number one skill, raising money, the number one skill of an investor in today's economy. Now, why would you want to use other people's money if you have your own? Good question. Here's why. And it's my fifth example, your deal structuring skills. You see, investing subject to, subject to the financing,

or investing with lease options, whether that's your acquisition strategy or your exit strategy, contract for deed, seller financing, among many other real estate investing terms. You see, these are terms that an investor with money might not ever hear. Or if they do hear of them, they rarely, if ever, use them.

And when you are forced to invest in real estate with no money, these types of terms, along with their implementation, will be the difference between you succeeding or not. And when you can incorporate these skills with money, returns of 10% or 15% or even an awesome 25%. Those types of returns that you could create with money, with these types of skills, those can easily turn into infinite returns.

And I'm not embellishing by using the word infinite. That's not, what's the word, hyperbole. That's not exaggeration for effect. I mean, what is your cash on cash return? if you collect $200 a month of cash flow, you've got a deal and it pays you $200 a month of cash flow. What is your return on that deal if you put $0 into it?

Yep, infinite. Literally, you can't calculate it. And people that have money don't get to experience that. They never learn how. They never learn how because they never had a need to put a deal like that together.

So they settle. for a 15% return. Of which, hey, there's nothing wrong with 15% return. I'm just very attached to my infinite returns. Who's going to hit that financial freedom mark quicker, the person with a 15% return or the infinite return? And I consistently create infinite returns for myself because I know how to structure creative deals.

I had to learn. I had to figure it out. I was forced to. and I know how to raise money from other people and use it in my deals. I had to learn how to do that. I was forced to learn how to do that. And I would have never, ever learned any of that

how to do any of those things if I started with money to invest. I mean, having no money in the beginning is the very reason I believe that I'm a successful real estate investor today. So if you're getting started in this game with no money or limited money, consider it your long-term advantage.

And if I may borrow Robert Kiyosaki's term, consider it your unfair advantage. Because once you've got money and you couple it with the skills that you learned in the beginning when you're grinding and grinding your way through on a day-to-day basis, trying to make it work, once you've got money and then you can combine it with those skills and that experience, it is an unfair advantage. all of a sudden that 15% return that everyone would find acceptable becomes an infinite return. So stick with it.

And you're just going to be wiser and more adept than your counterparts that have money. Now, if you do have money to invest and you want to level out the long-term playing field, try forcing yourself to conduct your investing with no money. Make a game out of it. Pretend you don't have any. and I think you've got to be pretty darn surprised with some of your outcomes.

It might be a struggle. It might be a challenge, just like so many of us experienced in the beginning. But when you stick it out and you start accumulating that experience and you start accumulating that intellectual currency we talked about a couple episodes ago, you start realizing how much power you actually have. So that's my advice for you today. Whether you got money or you don't. force yourself to invest with no money.

The long-term advantage far outweighs the immediate gratification. All right. That's all I've got for you today. So until next time, as a very wise person once said, every advantage has its disadvantage. Someone actually said that. I just found it.

Awesome. So 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.

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