Epic Real Estate Investing - Generating Passive Income in a Sellers' Market with Creative Financing | 1176

Episode Date: January 27, 2022

On today's show, Matt shares 3 pearls of wisdom just for you! Tune in and learn to determine what is the best type of passive income for you, how to buy a house in a seller’s market, without overpaying, and how to use creative financing to buy a house, that has a mortgage on it. Let’s go! Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terio Media. On today's show, I've got three very special segments for you. First, we're going to talk about passive income and what's the best type for you because this can be a rather personal question as there are many variables in place. So I want to get the best one for you. And then second, we're going to talk about how to buy a house in a seller's market without overpaying. And third, we're going to dive into three creative investing ideas on how to use creative financing to buy a house that already has a mortgage on it. All righty? You ready? Let's go.

Welcome to the all-new Epic Real Estate Investing Show. The longest running real estate investing podcast on the interwebs. Your source for housing market updates, creative investing strategies, and everything else you need to retire early. Some audio may be pulled from our weekly videos and may require visual support. To get the full premium experience, check out Epic Real estate's YouTube channel, Epic rei.tv. If you want to make money in real estate, sit tight and stay tuned. If you want to go far, share this with a friend. If you want to go fast, go to r-ei-aise.com. Here's Matt. So what are the best sources of passive income? Because there's many. But what are the best ones? And specifically, what are the best ones for you? So I'm going to help you out with that

so that your money isn't primarily or directly dependent on your time or your labor. I mean, what would that be like? If you're tired of exchanging your time for dollars, hey, I get it. And I'm sure you've heard of passive income, but you're not sure what it is or how to attain it. I mean, you don't even have a starting point and you might even be doubting if this is even a reality. So I'm going to walk you through the best sources of passive income available today so that you can choose the best one for you. How does that sound? So what is it? What is passive income? Well, it's the type of income that comes to you without you

having to do a lot of active work. In essence, you're putting most of the work in up front and maybe some occasional maintenance, some additional effort here and there to keep it flowing. Now, there are five basic forms of passive income of which require the investor to bring something different to the table to each one of those. So number one, certificates of deposit for just regular old savings accounts. And we know what those are. Right? We've brought. put money in, we give it to the bank, and then they give us a little bit of an interest rate. And when I say a little bit of an interest rate, you know what I mean. And that's the problem with CD in savings.

It's typically not enough interest. And for most part, CD really stands for Certificate of Disappointment. Number two would be dividends. And I also put in peer-to-peer lending. And this is where you take your cash, maybe you do it all at once, or you do it gradually over time, and you invest it into the stock. market and they pay you a dividend or you can do that same type of thing and put it on a peer-to-peer lending platform where it's lented out and then you get payments that way. The

problem with this is you typically don't have enough money to make it work and have it pay enough. You can create passive income with an idea like a business or an invention. You could write a hit song. You could write a book. It could be an app. That could be a blog. It could be a YouTube channel. It could be a podcast. And this is a really good form and a viable form of passive income for a lot of people. But for the average person, typically equates to there's not enough help. Now, the fourth way you can create passive income, this is a relatively new one. Number four would be our crypto currency. This is a digital currency that's going more and more mainstream by the day. It's becoming really popular and it's generating a lot of profit for people. But the issue with this is, it's really

kind of new and we're still kind of figuring out what it actually means and how it's going to fit into our life. And so there's a lot of risk involved. So there's not really enough, I would say, security yet for the average person. And the fifth one, which is my favorite, and you might have guessed it by now, is real estate. And real estate can produce passive income in a number of ways. But typically, it's from renting out the use of a property. But it doesn't have to be the whole property. You could rent out a room. You could rent out storage. You could rent out the parking or any unused space. Or you can just buy the whole property the traditional way and you can lease it out long term or short term. Short term rentals becoming a very popular passive income strategy for people.

And not only with real estate, do you get the passive income? You also benefit from appreciation. You're hedged against inflation and you have great tax benefits as well. You know, clients, they come to me because they want passive income. And even though they have a good, good job. They let me know that they're not real satisfied with their job. They're tired of working the nine to five and they just don't know where to get started and they're frustrated. And they tell me that they feel trapped and they don't really know what to do about it. And it's really a problem. And if that feels familiar to you, I want you to know you're not alone. I mean, how could you not be frustrated getting up each and every day going to work and doing

something, spending the entire day, the entire week, perhaps your entire life doing something you don't love? I mean, you're making. good money and you know you should have options but you really don't see anything in the realm of possibility of how you're going to create passive income and how you're eventually going to escape. You're really not seeing any light at the end of the tunnel. And I tell them, you've got to choose the passive income path that's best for you where the odds are best in your favor. Now, the one thing that has worked for more people than anything else is real estate, income producing real estate. And the way most people start is in their spare time. And they get a little bit

of success, they're generating a little bit of money, and then they might go part-time. And they'll continue to work part-time until that part-time income equals their day job income, and then they can afford to go full-time. And it doesn't have to be that complicated. It's really quite simple, actually, as long as you just plug yourself into a proven system that produces consistent results. You know, and talking about this, it reminds me of a private client of mine, Carolyn. You know, she had a really nice corporate job. She'd been there for a while, and she just felt stuck, though. And she came to me and said she wanted to escape

because she knows that over here we're the rat race escape artist. So she hired me to be her coach, essentially. And what we did is we sat down, we created a plan, a very simple plan that gave her small daily actions that she could take and that would move her forward

towards her passive income goal. And so she followed the plan. She just took up one step at a time, and after 22 months, she was able to walk away from her corporate job. She's completely supported by, passive income and she's never looked back. So the main thing is just to pick one. Pick one and get started. Create a plan around it and break that plan down into simple, easy, daily steps that you

can follow. And once you get going and you start producing the results and you're getting really good at it and it's producing the type of income that you want to produce, stick with it, perfect it, optimize it. And not only then can you start looking at a second stream because you can do multiples of these. You just don't want to do them all at the same time. Pick one and get good at and that's how you're going to escape. And if you're really serious about creating passive income streams for yourself, it might make sense for you and I to hop on the phone and start brainstorming some ideas about what working together would look like.

If that sounds interesting to you, take a look at rei-aise.com. There'll be a few short questions that you can answer there, and when you've answered those, then you can pick a time that's convenient for you and I to hop on the phone and discuss that plan. We'll be back with more right after this. With MX Platinum, $400, $400,000. annual credits for travel and dining means you not only satisfy your travel

bug, but your taste buds too. That's the powerful backing of Amex. Conditions apply. Hope is not a financial strategy. Let's get back to work. How to buy a house in a seller's market? That seems to be a question on everyone's mind, particularly those that

are looking to buy their next house or buy their next investment property. Considering the media coverage of all the bidding wars going on, a lot of people are very concerned that they're going to get priced out of the market and will never be able to buy. If you feel powerless as a buyer in today's market, I'm going to give you a strategy that can save you a bunch of time and minimize your effort. Buying a house in a seller's market can feel like a real challenge. And it typically is if you go about it in the same way everybody else is. I mean, if you do what everybody else does,

you're going to get what everybody else is getting. A lot of rejection and a lot of frustration. But today, I'm going to give you a strategy that can give you a very different result, one that would be more favorable. First of all, what do they mean when they say it's a seller's market? Well, a seller's market is when there are more buyers in the market than there are houses for sale. Therefore, the seller gets to choose which buyer they want, leaving buyers to compete against each other. And we know when you're competing to buy something, what that does is it drives the price up. And that's exactly what we're seeing in the market right now. The problem is, when a property comes on to the market for sale, all of the buyers rush and they

submit their offers and it inadvertently creates a bidding war. So this is how most people do it. They'll call up their real estate agent. The real estate agent will come by and pick them up. Then they'll go out and they'll shop for houses. They'll look at this one. They'll look at this one. They'll look at this one. They'll decide that, hey, I like this one. And so they'll submit an offer on that one. Then customarily, they'll get a counteroffer from the seller. And they'll notice that there are multiple offers on this house. So to compete, they're going to have to start lowering their standards. They might have to raise their price. They're going to have to start making some concessions, they're going to be removing contingencies, they might have to remove their appraisal

contingency, perhaps even the loan contingency. And ultimately, what that means is the seller is in control. And I hear it all the time. People are saying, hey, the seller made me do this. And then I had to do this. And I had to raise my price to this. And everyone is really, really frustrated in the market right now. Now, as a buyer in today's market, you're not completely powerless. I'm going to give you a strategy of how you can effectively compete and ultimately win. So the alternate approach, rather than going out shopping for individual houses and then submitting an offer and waiting for the seller to get back to you. There's another way that you can do this. You can play your own game too. So try this. Go to Zillow, go to Redfin, or maybe just deal directly with your real estate agent and look for multiple

properties that would fit your criteria. And then write multiple offers all in one day. Submit those offers, cite unseen. And then wait for the counter offers. And then you can go back and forth with the negotiations on multiple properties. This way, you're not directly tied to any one property. and you have more chances of actually getting your offer accepted. Now, if this sounds a little scary to you, understand in the contract, you are allowed to cancel. The law says buyer beware, and the contract gives you that right to look and inspect properties before you actually make your final decision, send in your money, and close the deal. So per the contract, you're going to have a designated time to conduct this inspection.

And if you don't like it, cancel it. And if you do, now you'd want to order your physical inspection and then follow through. The sellers play their game, you can play yours too. So, when it comes to real estate, and you might have heard this before, it's all about location, location, location. You've heard that, right? Well, when it comes to real estate investing, it's all about offers, offers, offers. And that's exactly what I did in my personal life when I was shopping for my primary residence

is I incorporated this real estate investing strategy into my home buying strategy. You see, I just moved from Los Angeles to Las Vegas. I did that about two years ago. My wife and I, we decided to rent for two years first just to make sure that we liked it. And we did. And so our lease came up when it was time for us to go out and look for a new home. And we knew what the market was like. We knew what the conditions were. We knew we're going to have to play this game. But we went about it looking for the actual dream home first, one at a time like everybody else was doing. And sure enough, we found our house, we submitted our offer,

and we ended up in a bidding war. We tried it one more time. Same thing happened. So I was like, stop. This is what we're going to do. The same way we buy our investment properties, we're going to go about buying our primary residence, our dream home in the exact same way. So we went out and we found 10 homes that fit our criteria. We told our real estate agent submit all 10 of these offers in one day, and we did. And then we sat back and we waited for the counteroffers to come in. And four of them did. We counted back all four of those.

Two of those ultimately ended up selling to somebody else, but there were two left for us. And back and forth a couple times, and we got both of those offers accepted. Now we went to physically look at those houses, and then we picked the one that we liked best. And so we went into contract and proceeded with the one that we liked and we canceled the other. So the bottom line is if you want to buy a house, this is the market you're going to experience for a while. The sellers are in control. They're playing their games. We get to play our games. That's how it's working right now. Now keep in mind, this is the game to play if you're ready to buy it today. So once you've made that decision and you've made your commitment that you

are absolutely going to buy a house and you want to buy it now, go ahead and submit those multiple offers. That's the game that we've got to play as buyers. We can play our game or we're going to be forced to play the seller's game. Thanks for sitting tight while we pay our light bill. We'll be back. Right after this. Boarding for flight 246 to Toronto is delayed 50 minutes. What?

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That's a really good question. I mean, the bank has already financed it once. Can you do it again without paying off that existence? bank loan. Imagine that you could. I mean, what would that mean for your real estate investing? How much sooner could you escape the rat race? And how much faster could you build your wealth? Seem like fantasy land? It's more real than you know. There are multiple solutions for seller financing a house with a mortgage. And each one is a little bit more creative than the next. And they're all very doable. Even if you've never attempted such a thing. I'm going to break down the

three easiest ways that anyone can do. Right first, seller financed defined. This is when, instead of going to a bank to get money to buy a property, what you're doing is you're asking the seller to give you that money to buy the property. They don't actually give you money. What you do is you give them an IOU that you're going to make payments until that property is paid off. That's seller financing. And it's really easy to do when there is no mortgage, when the home is paid off free and clear. But is it still doable? if the property already has a mortgage? The answer simply and quickly is yes.

But there is something called a due-on-sale clause that's inside of most mortgages, and that can interfere with this transaction. But there are three ways that you can do this to maneuver around that do-on-sale clause. So the first way is what we call a lease option, more commonly referred to, at least in layman's terms, as rent-to-own. And this is where you go to purchase a property from a seller, and if they already have a mortgage on it, this is how you do it. or one of the ways you could do it is you would enter an option agreement.

And what that's doing is it's establishing a purchase price for you somewhere in the future. And then there's a second agreement where you actually lease the property. So you actually get to live in the property with the promise to buy the property somewhere down the road. Now, that option, it's not an obligation. It's just giving you first right of refusal to purchase that property should you choose to do so. And typically, a small portion of your rent will be applied to that person. So that's the first way. Now, the second way is what we call agreement for deed.

And it can be referred to in different ways depending on where you live in the country. Sometimes it's a contract for deed, a bond for deed, or a land contract. And how this works is very similar to how you purchase a car. You know, when you go into the dealer and you go ahead and you test drive some cars and you pick the one out that you like, and then you give them a down payment of some sort, and they'll finance the balance. Now, you can take that car, you can drive it off the lot. It is yours to use.

You have full right to use that car. But you don't technically own it yet because you don't have title to it. So you have to wait until you make your final payment and then you receive your title in the mail. That's how a land contract works for real estate. So in this scenario, if there's a mortgage already on the property, you can effectively buy that property, have all the rights to it, all the benefits of it, but you're not officially on title until you make your final payment. And because you're not officially on title, you're not officially on title,

title, it doesn't trigger the due on sale clause. The bank will never even know about it. The third way that you could do this to seller finance a property with a mortgage on it is called a subject to transaction. And that's when you take over ownership of the property subject to the existing mortgage. But then you've got this thing called the due on sale clause that you may or may not have to deal with. Typically not, but it's there and that potential is always there. So you don't want to get busted and have to pay that loan in full before you're ready. So by using this third strategy, by implementing a land trust, what you do is you put the property into the trust where your attorney would be the trustee and the owner would be the beneficiary.

Now, this will show an official transfer of title, but it doesn't trigger the due on sale clause for two reasons. First, it's a common estate planning practice. It raises no red flags. It happens every day, the bank see it every day, and they kind of understand what it is. The second is, there is an exception when a property is transferred into a trust. The banks cannot trigger the due on sale clause. So now the question is, how do you become the owner of it? So at this point in the transaction, the owner is still the owner. That trust has been recorded against title. So everyone knows that the trust now owns the property, but the owner is still the beneficiary. So the way that you become the owner of the property is you actually purchase the beneficial interest of that trust.

Now, when you do that, that document is not recorded and nobody will ever know. Now, there's a number of different types of creative financing strategies that you can implement inside of your real estate investing. I just gave you three very basic simple ones. If you want to go deeper with this, I'd be more than happy to give you the very cheat sheet, 21 creative financing terms. It's the same cheat sheet that I give to my private clients. And if you'd like, I'd be glad to give it to you for free. And plus, I'll give you a deal structure template cheat sheet that'll show you how to blend all of these different strategies together so you can really take your real estate investing up to that next level. You can grab that for free at epic breakthrough.com.

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Health, peace, blessings, and success to you. I'm Matt Terrio. Living the dream. Yeah, yeah, we got the cash flow. You didn't know home for us. We got the cash low. At Desjardin, we speak business. We speak startup funding and comprehensive game plans.

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