Epic Real Estate Investing - How to Buy Income Property the Right Way | 1180

Episode Date: February 24, 2022

In today's show, Matt reveals how to buy income property, the right way, step by step. But before that, he covers real estate stories that came out last week regarding income properties and gives his insight on the overall current housing market. Let’s go! Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terio Media. All righty on today's show, I want to run through with you step by step, how to buy income property, how to do it the right way. I mean, I really want to focus on everything that you should consider when you're ready to pull the trigger the next time. But first, let's go through some real estate stories that came out last week regarding income properties and really the housing market overall, stuff that every real estate investor should understand and take seriously.

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, EpicR-E-I.TV. If you want to make money in real estate, sit tight and state state.

If you want to go far, share this with a friend. If you want to go fast, go to reiace.com. Here's Matt. So we're going to talk about the housing market, of course. Income property is one of the primary things I want to really look at. How to Find Discount Real Estate is a very interesting article just came out in Forbes, I think. And then private money. How to raise that private money.

Homewire or Housing Wire just came out with that. and what that could mean for the real estate market and you, right? So could rising mortgage rates trigger the next housing crisis? And that's the big question, because we've talked frequently here recently about supply and demand and how the demand is so great and the supply is so small, and the demand is growing and growing and growing.

And that's not just because more people want to buy houses, it's because we have more people that need houses and that demographic is aging through the home buying years, and the peak of them are going to hit in about two years, that's going to be the biggest portion of our entire populations when the millennials hit the age of 31. We're two years away from that. But, I mean, there's a bunch of them right now that are 29

and a bunch of them right now that are 30, and we hit the peak of our population, our demographic, and when they hit the age of 31, so in two years, they'll hit that average first-time homebuyer age. And then there's a bunch of people behind them, too, and then you got Gen Z, and it's ridiculous. the whole thing, the point I'm making here is we just have more people than we have houses. And we're just not building them fast enough.

After 2007's crash, new home builders got really nervous. And they pulled way, way back and just stopped building. And we had a good, almost a decade of really home building. They were being very cautious and not going all in and doing it very softly, quietly, slowly. And so now that the demand is here, we have the supply chain issue. So now they can't build them as fast as they. they want to build them. So we have this whole thing.

And this whole backlog, it was a, I think it was a National Association of Realtors came out and said, it's going to be about 10 years of steady building for us just to catch up and for this to be a normal market. So the whole point that I'm making here is real estate investing for the long term, for the next decade, at the very, very least, likely two decades in my opinion, probably one of the better investments, maybe even one of the better businesses you could actually be in. When demand is that high, all you got to do is go out and fill.

find the supply, and you can pretty much name your price. And that's exactly what people are doing and have been doing. So I kind of lay that out as the foundation here of what we're going to talk about. The big variable here are the interest rates. And that's really been a big part of, I guess, the news here in the last 60 days. And it's starting to come to a point where we're going to have to be looking at this. So I pulled this out here, says with mortgage rates now at the highest level, homeowners may be worried about a slowdown in demand and a correction in price. That's what we need to be looking at. So, Britton Hills said that there are three main macroeconomic forces at play that will affect

the real estate markets, inflation, supply chain issues, and rising interest rates. I certainly think inflation is one. It's going to cause, I think it's going to support prices. And if there's any hedge that you could possibly have against inflation, it's going to be housing. Supply chain issues certainly is going to slow down the new building. But the interest rates, if they raise those, that could impact. the sale prices, right? So he says, I think overall there's a greater headwind here

for further appreciation in most areas than further tailwind. For the past four or four or so years, we've had interest rates falling and we've had a great bond bowl market that's pushed asset prices up. And we're starting to see those forces change a little bit. And I think a big determining factor will be, how is it going to take to get this supply chain crisis under wraps? How long all that's going to take. And so that's just putting a lot of pressure on shooting housing prices up because building costs are so expensive. So pretty much what I've been saying here for a really long time. And so rising mortgage rate won't affect areas, all areas equally. And then right here, there was something here. Let's see. I think it depends on how quickly we see rates rise.

If it's a moderate increase over the course of the next year, I think that the areas that are still doing well for housing areas like Utah, certain areas in California, Florida. They are booming housing markets right now. I don't necessarily see that boom coming to a halt. And so it was right here. If it's a moderate increase over the course of the next year, that's a big if, right? Because we saw an amazing job report come out last month. We saw the economy is improving and it's healthy or healthier. And then we saw the big inflation thing, the big numbers. That was what, seven and a half, 7.6 percent, I think, last week. And that's a big concern because that's saying, signaling to the Fed, they need to take

robust action. They need to take bigger action than they thought. So the jobs are good, so that means the market can handle it. And the inflation is bad, so that means we have to act really fast. So whether that's going to be a moderate increase or not over the next year, we don't know. We're anticipating between that 50 to 75 basis points increase in March and likely a full point increase by April. So something to think about.

I don't know if that's how you define moderate or not, but I think that's pretty significant. Still, buyers looking to invest in a property that's not primary residence, should stay away from the commercial space for now. And he went on to say how more people are working from home. That's going to be an issue. But right here, he said, I think the single family home market will continue to do well

and be okay for most people in most areas, but I really think the biggest risk now is in commercial real estate. So we've seen so many people go remote. There you go. I just said that. And here's one last thing. This is what we preach here so much, you know, how to invest in real estate so you can retire early. And you've got a big developer being quoted here from Utah who runs a multi-million dollar real estate company and was burned in the 1980s buying real estate simply looking for price appreciation.

And he created a thesis. Never again will I buy investment property solely for price appreciation. It needs to bring in something, even if it's not covering 100% of the overhead. And needs to at least be covering a portion of it. and that is very much the foundation of this whole what we do here at Epic, right? It's all about cash flow. It's all about producing income. And a lot of people right now are thinking about these mortgage rates and how is it going to impact the value of real estate?

Is it going to go up, going to go down? Well, that's how the laymen think about it. You're a much smarter person than that. You're a real estate investor and you think about things other than appreciation. So the prices may go up or down, but as long as you're cash flowing, it's going to be a good investment long-term. We just have more people than we got houses. And so that's going to support that for a long term. And so then I went and I found this came out.

That was yesterday what I was just reading you. And this here came out today. And this is actually pretty, pretty bullish on the housing market. The spring 22 housing market will absolutely crush buyers. Zillow says home prices despite 22%. Now, that's the most aggressive prediction I've heard. But I don't think it's unreasonable, right? heading into 2022, there is a wide consensus among real estate firms that the annual rate of home price growth, which peaked at 20% August of 2021, would steadily decelerate this year as some normalcy began to return to a housing market that had boomed during much of the pandemic.

But now some experts aren't so sure, right? Because back in December, they had a forecast of 11% by the end of the year. Then in January, just a month later, they revised that and said, nope, probably going to be closer to 16%. And then on Wednesday, Zillow once again shifted its forecast. It now expects the year-over-year rate of home price growth to peak at 21.6% in May. And to close the year at 17.3%. Simply put, instead of decelerating Zillow sees the 2022 spring housing market getting even hotter. So what's going on? So they kind of reiterate a little bit here of what I was talking about is inventory levels beginning to normalize this year.

The situation is getting worse. of them normalizing. It's getting worse. In January 2021, the number of homes for sale was 26% below the level hit in January 2020. Last month, we were 42% below January 2020. That lack of inventory means buyers will once again be forced to bid up prices if they hope to land a home. And I'm going somewhere with this housing market thing. One is like if you own real estate right now, great. You're going to be really benefiting from, well, you've already benefited from the last few years, but it's going to continue. But what is there to do now if you don't or if you have some but not as many as you'd like? Right.

Let's look at that too. But first, mostly home value growth is expected to continue accelerating in coming months. The robust long-term outlook is driven by our expectations for tight market conditions to persist with demand for housing exceeding the supply of available homes. Wow, it's almost like I wrote this. I did not. But I've been saying this for over a year now of how we have this real big imbalance of supply and demand. Let's see. If the year over year rate of home price growth does hit 21.6% in May, it would mark the highest since the data was first calculated in 1980s.

It would also be more than five times greater than the average annual rate, 4.2% notched over the past four decades. And well above the peak 12-month price jump 14.4% recorded in years leading up to the 2008 housing crash. Okay. Where was the next thing that one part? Because they did mention the interest rates. That's what I want to get to. Okay. So why is there so much uncertainty when it comes to price growth, right? So if we have this supply and demand so much in our favor of housing appreciation,

why is there still a lot of uncertainty? Well, it really just boils down to the mortgage rates, which are beginning to spike now that Federal Reserve rate hikes look all but certain. So in December, the average 30-year fixed mortgage rate was 3.11%, according to the Merch Bankers Association of this week, that rate is up to 4.5, 4.05%. As rates rise, it could let some steam out of the market as some buyers get priced altogether. Normally, this is big of a mortgage, this big of a mortgage rate height would cause an immediate cooling effect on the market. However, not all housing economists are certain it will damp in the 2022 spring market.

There are so many sidelined home buyers that even if some are priced out by rates, there will be others waiting to replace them. So again, just a testimony to how many people that are out there that need housing, right? How many people that need housing? Miles, what you got here? As an MLO rising rates along with prices continue to stay higher, they normally will naturally push a lot of buyers out of the market until market corrections takes place. True that, right? But there's saying that there's so many more sitting on the sideline.

So here's the next part of it, though, right? And Miles has a point. It's going to push a lot of buyers out of the market that Fortune, article said somewhat the same thing, but there's other people waiting. But what about those people that do want to buy the house, right? Well, here's this here. Renting a home now is even harder than buying one in unrelentingly hot U.S. market. rental prices for single family homes grew 7.8% in 2021 and all-time high according to core logic. Rents don't go up that much year over year. I've been a landlord for a very, very long time. And we're lucky to get an extra 50 bucks,

a hundred bucks a month when a lease comes up for renewal. And that's mostly in the Midwest and the South. It's going to be a little bit different on the coasts. Here in Vegas, I'm getting ready to, I purchase some properties right when I first moved here. So those leases are just coming to do so. I'm going to be able to test the waters a little bit. But there's too many people. They've got to live somewhere. And if they can't afford the house, they're going to have to go out and rent one. But the rentals are so difficult to find. Right. So for Atlanta real estate agent, Jamie Douglas, a dearth of inventory has made it almost impossible to take on new clients hunting for affordable homes. Now she works with people who have at least $5,000 a month to spend on rent,

double her usual base of around $2,500 because there's just nothing available at lower price points. One house will get 15 to 20 applications to be rented within a day, she said. And that's been my experiences with my rentals as well. I literally have people begging me to get them a rental. It's just crazy down here. right and so I'm in I'm heavily invested in Alabama I'm in Missouri I am in Indiana and now we're starting to really expand here in Nevada or Las Vegas and we're experiencing the exact same thing so it's funny it's because everyone thought that the rental market was just going to absolutely

suck because of the pandemic and with the eviction moratorium and all that and like no one wanted to buy a house because they thought no one was going to pay their rent I actually I got to tell you with over 50 rentals that we hold under our portfolio, just personally, not counting the hundreds and hundreds of our clients, that it was never an issue. And this is why it wasn't an issue, because the demand is just so darn high. No one even wanted to take a chance of not paying their rent. And the headlines and the media, they wanted you to think something different, but that's just not how it played out in the real world. I'm getting to the point where I just doubt everything I hear on TV now.

Or at least I take it with a grain of salt and I'm going to do some further. research before I take it to build any type of commitment behind it, right, or any sort of conviction behind it. So this is the latest turn in the unrelenting hot U.S. housing market where remote workers and young families fleeing coastal cities for the Sunbelt during the pandemic spurred double-digit increases in housing costs and squeezed supply. And at a time when stocks are slumping, cryptocurrencies are crashing and interest rates are set to rise.

Real estate seems to be the only area of the market impervious to a slow down. Okay. Let's see. Right here. We talked about, okay, rental prices for single family homes grew on an average of 7.8% in 2021, an all-time high, according to the most recent data. In December, U.S. home rents jumped 12% year over year for the month. So just in December, and with Miami leading the way of 35.7%. So here I got a list. You can see right here historically, this is what I'm used to.

These are the years right here, these nice flat years that I've been in the landlord, and I've never really been able to raise my rents. because I didn't want to lose a tenant. I didn't want to scare them away. You can see in 2000, like, we're just flat. And then right here is right about the pandemic where everything crashed. And look what has done ever since. It's exploding. So this is the time you want to be in real estate, right?

The supply and demand is supporting that. But now not just with purchases, but also with rentals. And there's a huge shortage of those rentals. So we'll look right here, some of the hotspots. Miami was number one, 36% up 36% year over year. Phoenix, Mesa and Scottsdale, Arizona, up 19%. Orlando, Florida, up 18%. Here we are, Las Vegas, Henderson Paradise.

So let me tell you a real quick story. When I first moved here to Vegas, I've been here about two and a half years. Mercedes and I, we decided we wanted to rent first just to make sure this is where we wanted to plant our roots. We want to make sure this is where we wanted to stay. So we lived in a really nice home, and our lease came up. And we wanted to stay. So we were asked for a renewal of the lease, and our landlord was glad to give it to us.

And our lease was actually an 83% increase. So when I see this set plus 17%, that's probably, it's an average. There's probably a lot of not so desirable areas or desirable places to live that actually brought the average way down. But if you have a nice place and you're maintaining it and there you live little, you leave, you leave little for your tenant to do, you're going to be able to demand far greater than these numbers, in my opinion. Okay, so Austin was up 16%, San Diego, 15%, Boston up 12%,

Tucson, Arizona, 12%. So you want to be a landlord. And if you need any sort of help with that, and you want to go and get your hands dirty and take it on one-on-one, you can go to REIACE.com, answer a few questions. I'll be happy to jump on the phone with you. We can brainstorm some ideas about what that looks like. And then also, you don't want to take that.

and you don't think maybe working one-on-one is together is going to be the right fit, and that's fine. It might not be the right time. I did put together a free training that you can go to at matsfreetraining.com, and that's there waiting for you. And then if you decide, I don't want to get my hands dirty, I just want you to do it for me. Well, that's what Mercedes does here,

and she has a free investor packet that you can download over there at cashflow savvy.com. And you just download that, and then if you like what you see, then you'll have the opportunity to book a time, and you can talk to her. Okay, so now, you want to get your hands dirty. I thought this was very interesting. Forbes magazine or Forbes.com is sharing with real estate investors.

This is just released today of how they can use Facebook ads to find off market properties. Because we know that looking for them on market can be competitive and not to mention very, very expensive. And it leaves little room for any sort of creativity. So I kind of went here and they had actually some really good advice. So Facebook, we all know, is kind of declining in popularity. I am very rarely on there at all anymore. I'm there because of Facebook groups. So I checked in there every once in a while.

But as far as personally, my mom passed away a couple years ago. And I just realized that, wow, I was on there just for my mom, just so I could post pictures of what we do. And so she could see her grandson. And I really just kept all that update. And I didn't realize that until she was no longer with us. And I'm not looking for any sort of empathy or anything. God bless her soul.

I'm actually thinking about the crazy world we're living in right now. Who knows? She lived a fantastic life. But I'm not on there much, but there's still a lot of people on there. And the people that are on there very much could be you, as a real estate investor, the demographic you're looking for. Okay? So as a real estate investor, you no doubt turn to Google ads, including pay per click. We all know about that to help you reach your audience and produce solid leads.

some of the best leads you can get are from a good, comprehensive pay-per-click ad campaign, although it can be very, very expensive, but it's also very targeted. So there's a trade-off there. But you probably also use other tools like optimized blog post landing pages and website copy to target relevant searches and capitalize on search or internet or search or intent. Phrases like, sell my house fast and sell my house as is probably play a big role in your digital marketing strategy to capture traffic from Google. So if you've been here at all for any length of time checking in here with us,

the epic, at this epic show, then you know, that's what we do all the time. We're marketers. We're really, even though we want to be real estate investors, we've got to be marketers first.

We've got to be really good marketers to find these off-market deals. All right. So it says though, if you're not using Facebook ads in your strategy, you're missing out on one of the most critical tools at your disposal. Now, a lot of people have left, a lot of real estate investors have left Facebook ads

that used to advertise for off-market deals because Facebook changed a lot of their targeting options. when it comes to housing. So it was really difficult to hit your, and it still is, if you're going back the way that you used to do it a year ago, two years ago, five years ago, you can't get as targeted as much as you want, or that you probably were used to then.

So you have to be a little bit more creative. And they actually gave some really good creative ideas, which I think are fantastic, and it's just part of being a marketer, nothing groundbreaking, but I think something stuff that you'll find useful. But why would you even want to go to Facebook? Well, there's still 2.8 billion monthly active users, 1.84 billion daily active users.

That's a lot of people. And one of the free ways that I'll teach my clients that are kind of limited on a marketing budget, how to find deals, is to go to Craigslist. Craig's List is a free site. And there's a lot of mess there. There's a lot of chaos there. A lot of scammers and a lot of riffraff over there and shenanigans going on. But still, it's where all of the eyeballs are.

And I had Ivy Morales on here a while back, one of my RIA's clients. And, you know, she got inside of her first three months working together. She pulled together three deals off of just Craigslist. That's all she did. And so it just kind of proved my point that you just, wherever you're going to be marketing your real estate investments and your services, you want to go where all the eyeballs are. So Facebook, it still has billions of eyeballs, a lot more than Craigslist, right? So there's a major market on Facebook, but how effective is that?

the platform for reaching those you need to connect with. Right? How effective can it be? Well, it used to be super effective because they made it really easy for us. Now they took some of those tools away and not as easy. But first of all, they got and got these three steps. I think there's three steps? Yeah, three steps is good.

All right. So one, show them that it's possible. And they're really comprehensive here. I was really impressed by what Forbes came up with. Mostly this is underground information. They must have a real estate investor create this forum. But first, it's important to understand that many, people in your potential audience have no idea that they can sell their homes.

These properties are not market ready. They need renovations. They're hoarder homes or they're upside down and their mortgages. It's your job to show them that not only do they have hope of changing their situation, but that it's possible to sell their home quickly and easily. Okay, so when you're creating your Facebook ads, I would interpret this, and it's exactly what we do anyway. But you just want to show people that, hey, you don't have to fix your home up

before you sell it, right? You don't have to have open houses with people coming in every single weekend and you have to get lost on the weekend so the real estate agent can show the houses. So those types of things, people think that they don't have any equity so they, you know, they don't have any options to sell. So you want to create content inside of your marketing and side of ads, showing people what is actually possible. Okay?

And then number two is show them their homes. So it's not enough here to use Facebook ads in relative search terms. Remember, these people are not actively looking to sell their homes. homes so keywords are irrelevant. So they're not searching Facebook, but when you appear in their feed, you can create curiosity and have them and look into more. So to do that, you just use images and videos of homes and need of repair, those with serious renovation related needs, and even images of hoarder homes filled with clutter

and filth. See, even Forbes here, they understand what causes and creates a motivated seller, right? So they've got a house that needs repair. They've got someone that's upside down in their mortgage or they've got a hoarder home, anything like that. It's just all about getting viewers to connect with the image and with your message. So if you could do it via video, do it with a still image, then you just need to break through the mental wall. These individuals have erected. The notion that my house can't sell because it's too dirty, too clutter, too old. To do that, you'll need to use both interior and exterior images.

So before and after of what you're doing out there. And if you don't have any before and afters, then borrow some. Find a fellow real estate investor. You can go on to Craigslist. I used to do this all the time. I'd go and find people that have houses for sale on Craigslist. And then I would give them a call and say, hey, you know what? I'm going to a meeting tonight and I'm going to interact with a lot of people. If I'm able to find a buyer for your home, would there be room for a small referral fee in it for me? And I never got a note to that question. But what that did is it gave me the ability to market their properties.

So it made me look like a real estate investor that was in action and out in the street and playing the game and doing deals. That's how I did it in the very, very beginning. So you could do the same thing with these types of things. Hey, if I find a buyer fee, whether we want for a small referral fee, and then mark it as somebody else's before and after pictures. It's a really, you don't need to have a bunch of experience on your belt before you get started, is what I'm trying to say. Okay.

And next, connect with your message. So once you've shown these Facebook users, homes in similar conditions and locations to their own, they're primed for your message. You've started the conversation and made them realize that other homes on the market are like theirs and their home can sell. Now it's time to move them forward with your messaging. So this is often tricky, but it can be handled. Think of it as being similar to a bandit sign hung on a telephone pole.

The message is simple, succinct and direct. Sucinct and direct. I buy hoarder houses. Call me now. Right? I buy houses as is. No fees. Those are the types of messages that we're going to do.

I'm really surprised by Forbes, knowing what a bandit sign was. But just keep your message similar. You want it to be simple and to resonate with your own. audience. You've shown them their problem, told them that there's a way out, and now you're positioning yourself as the solution. Don't dilute that message with anything extraneous. So true. Keep them nice, short, sweet, and simple. All righty? So I know I got some chats coming over here to see what's going on. Okay, let's answer some of these questions here. Would it be better for someone new to real estate investing, focus on wholesaling, rentals, rehabbing in today's environment?

So very good. I think for most people, they will gravitate towards. wholesaling just because you don't need really any money to do it. And I think that's where the appeal comes from. And you can make some really good cash. Now, I would, two things I want to say on that. I don't know if I'll get them in the perfect sequence. But first is, don't consider yourself a wholesaler. Consider yourself, whether you're going to wholesale a property or hold it as a rental or you're going to sell it, resell it via seller financing. Refer to yourself as a deal finder. That's what you do. That's the highest paid activity inside of real estate investing is finding deals and locking them up under contract. So think of yourself that way. That's how you

should start as a real estate investor, a new real estate investor or someone looking to restart their career or restart their business. Just focus on finding deals. Don't commit to the exit strategy before you actually have the deal. Because you might find a deal that is better for you to hold and you actually have the ability to hold it. There's lots of free properties I've been given in the past that it didn't take any money at all for me to acquire that property. And boom, it's just another rental for me.

And then also other times when I've out been looking for rentals, you know, I get under contract and I conduct my due diligence and I just like, oh, you know what? This is not the, this is not something I do want to hold. So then I go ahead and I flip it. I go ahead and I'll wholesale it before I close and I make money that way. So just think of yourself as a deal finder, regardless whether you're just starting or you've been doing this for a really long time. And then once you've got under contract,

then you can decide what's the best way for you to profit from it. Okay. I was reading, we are building 1.5 million homes in the U.S. the most in the past 50 years. That is probably accurate. And I've showed this article. I don't have it pulled up right now. But I think it's 2 million homes.

We need to build every single. single year for 10 years straight to make up for the deficit. So although that is the most we've done in the past 50 years, if that's accurate, I'll just take your word for it. That article actually said we have to do $2 million of houses a year. And we were just barely hitting that number in 2007, 2008, or excuse me, 2006, 2005, 2006 just before the crash. But yeah, the supply is going to be limited for a really long time.

And I almost think FOMO is a really good strategy as a real estate. investor right now. The fear of missing out. We all have that fear and there's a lot of people think like, I can't go up forever. It's going to crash eventually. Based on supply and demand, I don't know. But kind of what we talked about here in the beginning, mortgage rates is the big variable, so we want to watch that. Let's see.

The man. So is Casey, Missouri, a better market than Columbia, Georgia? Should I sell a house in Kansas City for 130 and then try to buy a fix or up in Columbus or Columbia for 70 and walk away with some cash. I'm not working. Yeah, so that's another element to becoming a deal finder, right? If you're just starting, you might need the cash and flipping those properties to take in the cash might be the right thing.

Or if you've been doing it for a while and you're okay with your cash position, it might be time to start really kind of focus on creating your wealth and holding those properties. So if for your situation, I brought that up because this will be another thing to consider. You know, you've got an asset in Kansas City, Missouri, right? And you have the potential to sell that and go over to Columbia, Georgia. I'm not familiar with Columbia, Georgia, so I can't say. And there's so much here that I can speak on.

First of all, in the first question there is Kansas City, Missouri, a better market than Columbia, Georgia. Better market. See, that depends. Just by asking that one question, it depends on a whole lot. I pick all of my rental markets to see this. Now I'm speaking about, we're talking about income property. We're talking about fixing flips. What are we talking about?

But pick all my income property markets based on my property manager. Do I have good property management there? If I have good property management, I can take a mediocre market and make it great. If I have bad property management, it can make a great market, just an awful experience for the investor. So that's what I would be looking at there. depends. If you're looking for better market thinking about appreciation, I don't really play that game.

I've got burned enough times. You don't want to, and we even had that article with the guy from Utah here just earlier. It's speculation. It's gambling. Now, we're all predicting the market to go up. I think it's a very safe bet, but it is a bet nonetheless. So with that,

I don't want to leave you totally hanging here, but if you need some cash to support yourself, then yeah, that's something you got to look at, right? If the income from those properties or that property is not enough to offset your living expenses, then yeah, maybe. Maybe we go ahead and we downsize so we still own a piece of real estate, make sure it actually produces a cash flow. And then if you need to pull some money out for yourself, then that could be it. The other thing I might be thinking is, you know, I'm not sure why you're choosing those two places geographically. Maybe you live in

Kansas City. You're thinking about moving to Georgia. But if you got $130,000, can we make it really simple and just maybe you refi, right? I guess with you not working, that could be a little bit of a challenge and that probably might not be viable. Although, there's a lot of really great programs out there right now. Yeah, it all depends. It depends on what the goal is. Is the goal just to have money to support yourself or is the goal to find a better investment

where you're going to get more income or you're going to get more appreciation, higher demand? So it all depends. I really want to answer, but there's so much there that, what you call it? I think the job market is better in Kansas City. Could be. I haven't heard. I mean,

I've heard of Columbia, Georgia, but I don't know anything about it. But based on what we just talked about in these articles that we went through, it might not even matter because everyone's working remotely anyway. Something to consider. And that's something that we've never experienced it as landlords and as real estate investors before, because we're always looking for what's the job market there? What's the diversity of the industry like?

Are there any Fortune 500 companies close? Are there any anchor businesses there to assure employment, right? Because we want our tenants to have jobs. We want them to be able to pay their rent. Let's see. Tony, I went up $220 a month more in Central Texas when I changed tenants a few months ago. Fantastic. You know how much $220 a month does to your ROI?

Adding $200, it's significant. It probably rose you up 5, 6, 7% on your ROI, Tony. And I don't even know what the price point of the property is. And I feel pretty darn confident in saying that. For debt service coverage ratio alone, does one need to own their primary residence? If one does not own their primary residence, but otherwise qualify,

are the ways to get around it. Probably not with your conventional bank, your Wells Fargo, your Bank of America, your Chase. I'll give you a link here, Epiclendinghome.com. We just use them to purchase a couple properties. And so they're not,

the rates there aren't as good. as your conventional loan or your conventional bank. But they are good enough. They're good enough for us to cash flow. And we just used that because it was easier. And we're doing some other refinancing stuff with conventional banks right now. So we just kind of kept this off our credit score for the time being. So it's kind of like hard money for buy and hold.

That would be a good way. So it's a little bit more expensive, not as expensive as hard money, but it's based, it's a little longer term money that rather than doing just six months, what you call it? six-month or 12-month flips. All right. Let's see. Can one own an RV as a primary residence to qualify for you? So a good question.

So I see that these are kind of connected. You know what? I haven't heard of this. I have never come across that requirement. I'm imagining since you're asking this question, it's something you heard. I don't know if you heard it from secondhand information or heard it from the bank themselves.

But only my primary residence has never been a prerequisite for any of my loans. So I'm not sure. or maybe go out and get in a second or third opinion from an actual lender and go from there. And when you ask that question, I wouldn't ask it that way because it might cause them to raise their eyebrows and cause additional concern that you don't necessarily need by saying, can I own an RV as my primary residence or do I need a primary residence to qualify for a DCAS or a DSCR loan? Right. Just say, you know what, I have this house I want to buy? Do I qualify? Let them figure it all out, right? And let them ask them. the questions. Don't volunteer that type of information. That's my opinion. That's just basic negotiating, right? All right. Okay, I got a big one here. Let's see if we can do this here. So, Lewis, you got a whole book here. Good to see you too. Glad you made it. I'm not trying

to hijack this broadcast. I'm relatively new investor and have been following your tips and tricks on and off for the better part of the last year. Very good. Thank you. Hopefully it's been helpful. I'm currently trying to evaluate a two-property deal. The seller doesn't need to sell. but has relocated to a different state and really wants to sell to invest in their new local market. All right. Got it? I'm in way over my head with the evaluations on them. I have a great relationship with the seller at this point, and it feels like a proper analysis and offer away from closing this.

Okay. Boom. Any advice or investors that you can direct me to? Properties are just outside of Portland, Oregon. Okay. When you say you're way over your head with the evaluations on them, I'm not sure totally what you mean by that. But you can pay, right? So, and this might be a little bit advanced and I can't go into ultimate detail with you right now,

but I'll give you kind of what my answer would be is, you know, as real estate investors, we purchase property in one of two ways, either by our price in the seller's terms or the seller's price in our terms. As long as we can control one of those, we can always create a deal for ourselves. So if your seller doesn't need to sell as you shared, that's okay. So we can give them a higher price as long as we can get the terms that we need. And I would say you want to structure those terms in a way that that property is going to pay you more than it's going to cost you. Right. So you want to make sure that it actually cash flows.

So that's where I'd be going with this. And then put down what works for you, right? You've got this relationship with the seller. and you got the relationship with the seller and you know what they want or have an idea of what they want. But it doesn't matter to you, right? You want to try and give them what they want, but not at the expense of what you want. So write down on your offer, write down what's going to work for you. And if it's too low and you're a little bit nervous, you think it might insult them, then say that.

I think this is one of the best negotiating strategies ever is to preemptively strike before they can get offended or they can get insulted. it would be something like, you know, Mr. Seller, I've got this, I know you have your house for sale. You don't need to sell it, so I understand that. So I want to get you as close to your price as possible. But as you probably understand, it's got to work for me as well. I wouldn't be a very good real estate investor if I lost money with every invest in I bought. But I came up with what the market is going to allow me to do. And based on what you shared with me about the condition of the property, it's a little low.

And I'm a little bit embarrassed to show it to you. And I don't want to offend you. should I show it to you? And have them say, yes, show it to me. Let me see it, right? Okay, well, this is what the market is going to allow me to do at the moment. Who knows if we waited for a while, maybe I could get more, but this is what we got at the moment. Okay?

So I blamed it all on the market, and then I said, I asked them for permission to show it to them, even if it was going to offend them. Okay, so that's what I do. Write down the offer that works for you. We'll be back with more right after this. Boarding for flight 246 to Toronto is delayed 50 minutes. Ugh, what? Sounds like Ojo time.

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you call 18665-3-1-2-600-0. or visit comicsonterio.ca. Hope is not a financial strategy. Let's get back to work. How to buy income property? I mean, this is a really great question because most people don't realize it's a very different process

than buying your primary residence. You see, a home that's designed to give you comfort, to give you a lifestyle, so you're buying that property for an entirely different reason. An income property, that's there to provide comfort to your financial statement and potentially empower you to buy a better home for your lifestyle. And so I'll walk you through the six steps to buying an income property the right

way. Income property. It's a great way to produce cash flow for yourself. It's a great way to produce wealth. I mean, real estate overall has produced more wealth for more people than anything else than any other asset class out there and don't let anybody tell you different because that's a fact. So just by asking the question tells me you're rather intelligent. This is a smart move for you to even take this next step. Nevertheless, this process and investing in real estate does involve some risk. So, therefore, it is very important for you to learn how to buy an income property so you can maximize your income and minimize your risk, minimize those expenses so you have a really nice favorable outcome and all of your expectations are met. So I broke this process down for

you in six easy steps to follow. First thing is to decide whether investing directly in real estate is going to be a good fit for you. I mean, certainly the return is going to be there. the income is going to be there. The long-term wealth creation, that's all going to be there too. But there might be some labor commitments or some time commitments involved that you might not be willing to do. You might not be willing to make that trade for your time for those types of returns. And so you could pursue a different way to invest in real estate that doesn't require that. Like maybe through a REIT or an ETF or maybe through a fund of some sort.

But on the positive note, you might not want to discount becoming an actual property owner just yet. because, like I said, the income, the returns, the appreciation is all there. And then your ability to use leverage can multiply your returns to create some really unmatched returns anywhere else in the marketplace. And with that said, here are the considerations. There's the time commitment. Even if you decide to hire a property manager to take care of all of the, you know, the day-to-day maintenance and management of the property, there still could be some situations where

your time is needed. You might have to make the big calls. You might have to analyze the reports with your CPA. You may have to fire the property manager to hire a new one. The second thing to consider is liquidity. Because once you purchased a piece of real estate, your funds or the money that you have invested kind of locked in there for a minute. And if the situation comes about where you need to pull money out, where you need to sell

that property and you want to get fair market value for that property, it might take a minute for it to sell. And then the third thing to consider is the capital requirements. You know, when purchasing the property, even if you are going to use leverage, you're going to use a bank's money to purchase the property, you're going to need 20% down. And depending on what part of the country you live in, what market you live in, that could be a substantial amount. There's also going to be the need for maintenance and repairs. There's going to be some closing costs when you close on the property. And you're going to want to have about six months of reserves or so just for incidentals for emergencies.

And the fourth thing would be the unpredictable nature of real estate. You know, they can be pretty reliable in producing a monthly income, but it's not 100%. There are scenarios where that property may go vacant and may go vacant for months at a time. There might be some major repairs that come around that you really don't want to be bothered with. Here's the point. If you're okay with these four drawbacks, I use the word drawbacks pretty loosely. If you're okay with those, then investing directly in real estate might be a great fit for you. Otherwise, you might want to consider something like a REIT or being a passive partner with another

real estate investor. So two, assemble your team. And there are three primary ways that you can go about this. The first way is you can go about it yourself. You can go in being a one-man army, a one-man investor. You can wear all of the hats and you can take care of everything. If that sounds like it's going to be your situation, I went together and I put a training together for you just on that, on how to get started. And you can find that at mats free training.com. The second way you can go about this is the traditional route. You can just go out and find yourself a real estate agent. kind of let them do all the work, at least the scouting and the investigating and helping you try to find that actual rental property.

You can do that. And then you'll go ahead and you'll find yourself a lender. And then your lender and your real estate agent yourself, you'll work together to close that deal. And then once you've got the deal, you go out and hire your property manager. And they can go ahead and they'll take over the property for you. So there's very little that you'll need to do. I mean, you'll be the boss.

You'll be calling the shots. But you can delegate all of that stuff the very traditional way. Now, there may be a scenario depending on what type of property you purchase and what type of condition it is in. There may be the need for you also to hire a contractor. Or the third way, and this is how most busy professionals go about it, people that don't really have the desire to do all the heavy lifting or don't really have the know-how or a real interest in learning how, is they'll go through a turnkey service. And this is where you can go and purchase a property that's already been found for you, vetted for you. It's already

been rehabbed for you. There's likely already a tenant in place. There's already property management in place. So that's a very popular route these days for people that just don't want to get their hands dirty. And if you like the idea of that, it might make sense to be you to actually get on the phone with Mercedes. You can download her free investor package. It's totally free. You can get that at cash flow savvy.com. Then after you download that document, that little package there, it's pictures and colors and numbers. It's really great. You'll enjoy it. And after you download that, you can go ahead and pick a time to hop on the phone with Mercedes and to discuss what that future might look like for you in participating in a turnkey investment. You can brainstorm some

ideas and she's really creative. She's great with that stuff. And if you need it, she can even arrange the financing for you too. And that little journey begins at cashflow savvy.com. So be sure when you're analyzing your income property that you're adjusting those expectations. You see, you don't have to live in the property. So if you don't like the color of the kitchen, no big deal. That shouldn't even be a part of your decision process. Or if you don't like the color of the house or how the curb appeal is, No big deal. That's not your concern. You're not going to live there. You're not buying this home with your lifestyle in mind. You're buying this home with your bottom line in mind. Is this property going to perform? Is it going to produce the revenue that you expect? Is it going to appreciate

the way that you expect? These are very different ways and looking at properties. Number three, decide what and where you want to buy. It's really important before you actually pull the trader that you go into this process with some goals. You know what you're looking for and you know what you want to have happened. For example, do you want to purchase a single family home or do you want to purchase a multifamily home? Or is the low maintenance nature of purchasing a condominium? Is that more up your alley? You can generally get more cash flow from a multifamily property.

But generally speaking, with single family properties, you have more upside appreciation potential, especially in the hot real estate market that we're in right now. Now, most will say the geographical location of your property is important. And I tend to differ. Regardless of what type of property you choose and wherever that property is located, the ultimate performance of that property is going to depend more on the property management than anything else. So when thinking where to invest, that where should be strongly influenced by where you can find the best property management. You see, you can pick a really hot market with all the appropriate economic indicators that points

towards a really nice producing asset. But if you've got bad property management there, I promise you it's going to be a really bad experience for you, the middle of the road market, and it's really going to be a great performing asset for you. So when you're looking at your income property and you know for sure that you're not going to be managing it yourself, I want you to do as much due diligence on the property manager as you do on the actual property. At the end of the day, the property manager is key.

Number four, you want to qualify for your financing. Now, if you plan on going in and paying cash for the property, probably no need to even pay attention here. But for most people, you're going to have to figure out where that money is going to come from. And there are a number of different options for financing your real estate. I mean, you can just go down to the bank, the nice traditional way. And if you've got the down payment, you've got the credit score and you can make that happen for yourself, that's how most people do it.

There's nothing wrong with that. The second place you can find financing for your property. properties are via asset-based loans. And this is where a lender is going to look more at the asset than they are you, the borrower. They're going to determine whether or not they want to give you their money based on the performance that they think and the security that they think that property is going to provide. And then there's some alternative financing options available to you as well. I mean, in addition to traditional financing, that conventional financing we talked about in these asset-based loans, there's some other places you can look at. Now, this isn't an exhaustive list, but let me give you some of those ideas.

And one of those things to consider it would be a home equity line of credit. Can you pull out an equity line of credit on your primary residence and use that to purchase your investment property? Or do you already have an investment property that's got a bunch of equity in it? Can you get a home equity line of credit on that property to purchase your next one? This is a really great way to unlock idle money that's locked inside of your investments, particularly your primary residence. And a lot of people get a little bit, you know, squeamish about that, thinking that, ooh, I'm taking out a piece of my home security. No, what you're really doing is you're taking the equity that is no longer working for you and you're removing it from a dead place and placing it in a live performing place.

It might feel a little risky, a little uncomfortable. And if that's above your risk tolerance, then that's okay. You don't have to tap into it, but it is an idea to consider. And if you decide to move that direction, it's actually a very financially prudent thing to do. As it takes resources that you have that are just sitting there doing nothing for you and it puts them to work. And that's one thing that you always want to check. in on with your investments. Meaning, when you check in and invest your money, is it working as hard for you as you did for it? That money that's locked up inside of your house is sitting there

chilling. It's already retired while you get up and go to work every day. So, considering, then another place to look at are your qualified retirement accounts, like your 401k or maybe you have an IRO, whatever that retirement account may look like, because there's plenty of scenarios where you can borrow from that to go out and buy real estate. And then you'll go ahead and you pay yourself back. And a lot of times when you're paying yourself back, that can also be tax deductible. So that can be a really good solution. Or, and hold on to your hats for this, you could just liquidate your 401k and buy your investment property. Now, I know a lot of people get really freaked out about that. I've done a lot of videos on why that. I think that's a really wise thing to do,

but I get a lot of pushback. So it's okay. So if that's above your risk tolerance and that's just way too much for you, then don't do it. But consider this. You've got this money locked away that you can't touch until your retirement age. If you were to take that money out and place it into an income property that paid you right now, you could start benefiting from that money right now. Yeah, but Matt, what about the penalties and what about the tax implications? Totally true. Those are real and they are there and you're going to have to deal with them. But really, all you got to do is just a math equation. Are you going to have this property long enough and can you purchase it soon enough before you actually have to retire and need that money to pay,

yourself back all of the penalties and the tax liabilities that would come with an early withdrawal like that. Again, it's just a math equation. If that's too much for you right now, this is not the time or the place, but it is something to consider. Number five, go shopping. This is the fun part. Now that you know what you're looking for and you've got your team in place, you've got your financing lined up, go out and pick the best income property you can find for yourself. But just remember, you're looking for an income producing asset. You're not looking for a home. So, don't be too picky. You want to get this money to work as soon as possible. You want to start enjoying the benefits of the cash flow and all the wealth creation benefits that

real estate provides. Now, here we are at the final step number six. Decide whether you want to manage this thing or not. If you do, that's perfectly okay. In fact, for your first one, it's probably not such a bad idea to get a little bit of experience, a little bit of education under your belt. But I would say, as soon as you possibly can, go ahead and hire that property manager. It's not a very high paying job. And it's not a really good. use of your time. There's better things that you can be doing with your life, whether that's having fun with your friends and family or out looking for new deals. And that wraps up the epic show. If you found this episode valuable, who else do you know that might too? There's a really

good chance you know someone else who would. And when their name comes to mind, please share it with them and ask them to click the subscribe button when they get here and I'll take great care of them. God loves you and so do I. Health, peace, blessings and success to you. I'm Matt Terrio. Living the dream. You didn't know whole world, we got to cash flow. At Desjardin, we speak business. We speak startup funding and comprehensive game plans. We've mastered made-to-measure growth and expansion advice,

and we can talk your ear off about transferring your business when the time comes. Because at Desjardin business, we speak the same language you do. Business. So join the more than 400,000 Canadian entrepreneurs who already count on us, and contact Desjardin today. We'd love to talk. Business. This podcast is a part of the C-suite Radio Network.

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