Epic Real Estate Investing - How to Buy Real Estate at a Discount | 311

Episode Date: October 30, 2017

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This is Terio Media. I'm casting from Terrio Studios in Glendale, California. It's time for Epic Real Estate Investing with Matt Terrio. Hello, and welcome to the Epic Real Estate Investing podcast. This is the show where I show people how to escape the rat race using real estate. And to make this happen for yourself, it's really simple. Just shift your focus. Do this one thing.

Just shift your focus from making piles of money to creating streams of money. That's where it all begins. And like I said, you only have to do that once and just embrace it and follow that up with corollet action. And your escape from the rat race is going to be at least 10 times faster than those that choose the alternate path. And just so you know, let me clarify, this is not get rich quick. I will never promote that. I just don't think there's any such thing. You got the lottery, I guess that's an option.

This is not get rich quick, though. It's get rich quicker and getting rich permanently. And to get started down that path or restarted, I created a free course just for you. go to free real estate investing course.com and you'll get a crash course on how to find deals and the two quickest and easiest strategies to a paycheck in real estate. And then just plug in here each and every week. And I'll show you how to put that paycheck to work for you in a way that it works harder for you than you did for it. All righty.

So I am in my hotel room traveling right now in St. Louis and getting ready for the epic intensive this week. And we'll just pick up from where we left off last week and turning you into a badass. real estate investor. So we're going to, we've gone through the badass investor plan. We went through the three primary pillars, the attract, the convert, and exit. And then we went through the nine profit accelerators of which you need all of them. But then I went deeper into the three that you that are really the most important that can give you some results the fastest, the flip, automating your lead generation and then presenting your price and terms. And if you have those down at a very minimum, you can at least start making some money right away. But if you ignore the

other six, this is going to be a really tough business for you. So let's circle back and start covering what we skipped over. Like we have all nine of these profit accelerators. We cover the three most important that can give you traction the fastest. Now let's circle back and cover the six that we skipped. And we'll begin with how to buy real estate at a discount. And specifically the secret to doing it that nobody really covers. And it's not that they don't know about it or maybe they do, maybe they don't, I'm not sure. Or maybe they know about it, but they're not conscious of it. of it, whatever it is, it's likely that they've just never thought of it from this perspective. And this particular perspective, I think, can give you a real advantage in your business and

can also help you just become a better real estate investor and become more resourceful to where you have more opportunities than most. You know, this perspective, when you do frame it in the way that I'm going to share with you today, you will have an advantage in your marketplace. You'll think differently than the herd. You'll take different actions than everybody else. There'll be more efficient actions. You'll become more resourceful in finding deals.

And you'll find deals that nobody else is finding. And ultimately, you're just going to do more deals. You're going to make more money. You're going to create more wealth. So the profit accelerator will cover today is finding problems. Because if you ignore this profit accelerator or if you'd get it wrong, you know, you're going to be frustrated. You can't find deals.

Your offers get rejected. sellers think you're crazy and ultimately, I mean, you're just never going to do this business. You're never going to find a deal. But if you get it right, you'll consistently find discounted real estate. You're going to get your offers accepted. You're going to get sellers to cooperate and actually even going to thank you after it's all said and done. And you'll be able to find deals consistently so you can make a living as a real estate investor. And, you know, it makes me think of Catalina Gomez.

She's a relatively new client of mine. And she's a great example of finding real estate. at a discount. She lives in Norman, Oklahoma. She invests in the Oklahoma City area. She works full-time at the front desk of a small hotel. She invest in real estate on the side. And she wants to switch that around. She wants to invest full-time and do the hotel part-time. She likes her work. She likes the people there. She wants to keep doing that. But she really wants to invest full-time. That's where her passion is. And up to the point where we met, she was getting all of her deals from a local realtor. And she was looking on the multiple listing service. And that's where she was finding her deals.

and Oklahoma is, or Oklahoma City, that area, it's a market of which it's not too difficult to buy cash flowing real estate right off the multiple listing service to pay retail for it and have it actually cash flow as well. But she wants to flip more properties than she was. She wants some big chunks of cash to go with her portfolio that she's building. But it's tougher to buy from the MLS with equity in place. It might cash flow, but the equity would not going to be there. And she almost didn't even become a client of mine because she couldn't imagine, buying a property any other way. She just didn't think it was possible to do it any other way.

And she couldn't contemplate why anyone would ever sell their house at a discount if they're so easy to sell on the multiple listing service and her market. So here's what we did. We shifted her mindset to stop looking for people that want to sell, to look for people that need to sell. And the reason people would sell that the reason that people would need to sell is because they have a problem, a problem. the type of problem of which selling their property fast, that would solve it if they could do it fast or at the very least mitigate that problem. So she started to just kind of shift what she was looking for and change her mindset and started to look for property owners with problems.

And if they didn't have a problem or if she couldn't uncover a problem, she'd send them an offer with her name and phone number and just move right on to the next lead. She would dwell on those that didn't have the problem. She'd still talk to them. She'd still send them an offer. but then she just moved right onto the next one. And in just a few months, I mean, here's what she got. She was able to flip three properties, of which the proceeds of those three paid for another

cash flowing property for her portfolio, paid for it in full. So she flipped three, took the profits, and bought a property, and owns it outright. And she currently has four more under contract, and she's starting to prepare to take her investing full time. She's getting there so much quicker than she thought she was going to get. So that's a badass. Catalina, congrats. All right.

So I've got three hot principles to share with you today that really kind of set Catalina out on this path and got such quick results. But I lead with this. And let this become your mantra. The foundation of every deal lies within the seller's motivation to sell. All right? The foundation of your deal, it lies within the seller's motivation to sell. Discounts, they come from a seller's motivation. That's the term where you get motivated seller.

And what motivates sellers to sell their property at a discount are problems, right? So they've got an issue. So that's key if you're going to consistently buy low so you can eventually sell high. So point one, the problem. Where there's crisis, there's cash. Where there's chaos, there's cash. That's where there's profit is. If there's no problem, there's probably going to be no discount.

So the foundation of every deal lies within that seller's motivation to sell. So the bigger the problem, the bigger. the problem, the bigger the discount. Personal distress, financial distress, property distress, those are all different types of problems that a seller might be going through. So point one, you have to identify the problem and then, or define the problem. Point two, then you have to identify who has the problem. Okay, so we got property owners and really anyone that owns or controls real estate. But you got property owners, resident owners, absentee owners, landlords, those are all the type of people we're looking for. But having said that, just a quick,

side note is that this will work with buyers. It'll work with lenders. It'll work with investing partners. Really, if you just identify or look for problems and you can present that a solution to them, you know, it's a great strategy for just about anything, getting anything that you want. Okay, so but today we're going to talk about sellers, talking about property owners, anyone that owns or controls property. All right, so you have to identify who has the problem. And then you have to develop your strategy, your, create your strategy of how you're going to access or get access to that person. Okay. So there's professional services out there that can do it for you.

You can build relationships. You can search records. And so we're going to cover all three of those things. Let's see. Identify the problem. Identify who has the problem and then come up with the strategy and how to get access to that person that has the problem. Okay. So point one, the problem.

Like I said, crisis. Anytime you can find crisis, there's an opportunity. opportunity there. There's cash. There's cash flow there. There's no problem. There's no discount. So the bigger the problem, the bigger the discount. And we're looking for these types of problems. You're looking for different types of distress, personal distress, financial distress, property distress. And like I said, your mantra, the foundation of every deal lies within the seller's distress, their motivation to sell. So it's the distress that leads to a seller's need to sell. The alternative is the seller's desire to sell. They want to sell. So you've got needs and wants some.

there. So understand this, 95% of all real estate sales, they happen because the seller wants to sell. And they typically sell for right around market value because they're not experiencing the type of reason or problem or the distress that requires a fast sale. So they can wait. They can wait until the market sorts out the value of their property and they can wait for the best offer to come in. That's how 95% of real estate sales go down. And you're not looking for those. You're looking for the 5%, The 5% of sales that happen at a discount. You're looking for those 5% of sales that happen because the seller needs to sell. That's a really big distinction for people when they really get it because they can look back on all of their lost deals, all of those attempts that didn't amount to anything.

And they can start to really clearly see that the seller just didn't need to sell, right? When we say the every deal, the foundation of every deal is and the seller's motivation to sell, if you didn't come up with a deal, then they're motivation. just wasn't there, so there was no foundation there for you to get that deal. And for those deals that did happen, they recognized that the need was a lot stronger there. So what types of problems would cause a seller to need to sell? Now, it's not a complete list. There's probably an unlimited number of problems out there that people could be facing that would cause them to need to sell. But here's an idea of the types of problems you're looking for, or at least there are signs of problems because we're looking for personal distress, financial distress, and property distress. So

So this is how you locate those. These are like the symptoms of there that could be something there. One is you're looking at tax liens. Those are easy records to research. Code violations or divorce. All that stuff's public record. Look for bankruptcy or probate. People that are in pre-foreclosure, the banks have to announce that.

And so those are easily findable lists of people or problems to find. If there's fire damage, if there's vacant houses, out-of-state owners, frustrated landlords. Any landlord that has a vacant property, they're probably frustrated. So that's an easy thing to find. Anyone that loses their job or job relocation, there's relocation services out there that could be a great resource. Anyone that's sick or here's another really simple one, weed abatement.

A lot of absentee owners have weed abatement issues. So anytime the weeds get too high on their property that they don't live at, they get a little notice. And all those notices are made public. and then there's short sales and there's inheritance. So these are all categories that could suggest someone may need to sell. It's not every person here that's dealing with these problems will need to sell. It's just that you're likely to find a higher percentage of need to sell peeps than you would if you just say selected every single house in a zip coat or in a city. I mean, that's what realtors do because their primary clients, their client base are those people that want to sell.

So it makes more sense to hit every house in a zip code and just like that's. kind of wait until the timing's right for that person to sell and hoping that you're building a relationship or familiarity with the sellers in that area through your marketing efforts. And hopefully when they decide to sell, it'll be your promotional piece that the seller finds. That's the whole philosophy behind how a realtor will market to an area. They call it farming and it's the realtor jargon. And I know of some real estate investors that actually do this too because they have the

marketing budget necessary for this type of marketing is they want to be the good. go-to-person in that area. But for most investors, they're likely to go broke via the marketing costs with this type of strategy. They just don't have the budget to last long enough to wait for those people that need to sell to, you know, raise their hand and say, hey, I'm ready to go. So instead, what we do is we look for categories of people where the potential for finding need to sell people is greater. And that's what the, that long list of different types of problems is, those categories of problems. That's what that represents. So now we know what types of problems we're looking for. Now, who has these problems? Like, we want to find the people that have

these problems. Now, we've defined the problem. Now we've been allowed to identify the person that has it. So specifically, who we're looking for are people who own or control property, who own or control real estate. You're looking for property owners, looking for resident owners, people that live in their property. You're looking for absentee owners, people that live elsewhere, but still own a property that they don't live in. And in a bigger category of absentee owners would be landlords who might have or investors that these are people that own a lot of property. And we could extend this even to institutional owners, like big financial institutions, like a bank or a fund. But in a nutshell, you're looking for people that own or control property. And when I say control, what I mean there,

the distinction there is, I mean like an executor of a will or a trustee or an asset manager. or even a wholesaler who has a property under contract, they're controlling that property right now, okay? So you're looking for people that own or control property, which owning or controlling that property presents a problem to them, which selling that property quickly and easily would alleviate some or all of their problem. Got it?

So now you know the types of problems you're looking for, you know the specific people you're looking for of who has them. Now, how do you actually find or get access to them, right? So we've defined the problem. We've identified the person. Now, how do we get access to it? How do we find them? All right.

So to do this quickly, it's pretty simple. Okay, you can contact a list broker of where you can buy data. And you can get a list of people of certain categories. You can buy a pre-foreclosure list. You can buy code enforcement list. Yeah, code enforcement list. You can buy vacant house list. You can buy mailing addresses and email addresses and phone numbers.

And they can range. greatly in price, but you're paying for the convenience. ListSource.com is a service that's commonly used by real estate investors. Listability.com is such a service as well. If you were to go to Google and just search for list brokers, you're going to find pages and pages and pages of such services. Real estate investors are not the only people that use lists like these. So just about every industry will access a list like this where they can go ahead and

define and break it up into a category of the type of person that they're most likely looking for. All right. So just go to Google and go for list brokers. You can pull divorce lists. You can pull probate lists. You can pull all kinds of lists. Now, if you're on a budget, though, with regard to your marketing, you can build these lists yourself for a fraction of the price. If not for free entirely.

You can access personal records and property records and city records and county records and state records, courthouse records. I mean, it's all public in the public domain. It can be time-consuming and tedious work, but you can do it yourself, okay? Just want you to know that you can pay for the convenience or you can actually go do it yourself. And although this is time-consuming work, you may take some comfort in the list that you compile for yourself with the most current data available is likely to be a higher quality list with less competition. Okay? the services out there, sometimes their data is nice and fresh, sometimes it's complete,

sometimes it's not incomplete or it's not complete, and sometimes maybe it's just, oh, they've been using that list, they only refresh it once every quarter or once every six months. You just never know. So the rule of thumb would suggest that the more difficult a list is to acquire, the better it probably is. A lot of people like to pick all the low-hanging fruit and go to the list services, and there's nothing wrong with that because we do that too.

But just understand if you were to invest some time and go down and really mine through the probate records, you're probably going to find opportunities there that don't exist through a list broker. Okay? Just an example. Or you can opt for speed and convenience in the interest of doing deals sooner rather than later. Just purchase the list from someone that's done all the work for you, and you can go that route. Okay? Just know, my whole point here is to know that you do have options and you don't need a bunch of money to get access to it.

Now, both of these options, they do have their pros and cons. One is ease, but might be a high competition because a lot of people are buying that same list. The other one is it takes a lot of time, but you might have exclusivity to that list or fewer people competing with that list. All right. So those are the pros and cons of whether you purchase the list or create it yourself. Now, the third way to get access to these people, these problem of property owners, is through relationships. Right? It's a good old-fashioned people business.

This part of it's never going to go away. So you can go through relationships, which is the slowest, way to go about it. But in my opinion, it's the very best way. It's the slowest way, but it's the very best way. You see, with strong relationships within your network, the business can actually become pretty darn easy if you work on and build the right and nurture the right relationships. For example, because of the relationships I've built over the years, I'm able to buy, hold, and sell in more than 10 different markets. But I'm only on the ground and in the trenches of two of those markets. Most of my deals today are

are sent to me on a spreadsheet from my connections, from my relationships. And this is just a really very nice way to do business. But I would have never reached that position had I not put in the work up front and earn a reputation of a competent and trustworthy real estate investor. So here's what I recommend, especially if you're just getting started or restarted. Go ahead, buy your lists. Buy the list so you can do business right now and start, but start networking right now so you can do business later.

Make sense? Buy your list so you can do business now, but start working or networking now so you can do business later. Don't wait to start building your relationships. Start now and do so from a place of providing value first. These are relationships, right? It's very difficult to rush these relationships if and because the longer they take to build typically, the deeper they go. So building them quickly might not get you what you're actually looking for and it can be disappointing if your expectations are too high. So just start and be patient, do so from a place of providing value first, be a giver with the expectations of receiving nothing in return.

That's how the best relationships are built. Just give, give, give, and not ask for anything in return. The time will come where that opportunity is going to present itself when that relationship is going to flourish and present itself as this great thing that you've been building the whole time. Right. So here's some ideas of who has access to your property owners with problems, some relationships you might want to start initiations. and building that you want to keep your eyes and ears open for and do right by these people. One will be family law attorneys, right? For divorce and probate and inheritance, anytime that's the business of a family law attorney.

And a lot of times there are assets there that need to be liquidated and liquidated quickly. And family law attorneys find a lot of value and working with someone that can help their clients do that because they want their clients to be able to pay their attorney bills, their legal fees, right? So that's a big one. Bankruptcy attorneys, obviously for bankruptcy, right? A lot of times there's assets there that need to be liquidated, especially with all the new laws. If the person's in debt and needs to start liquidating some assets to pay off some of that debt, then that might be a really good person for you to have in your database and build a relationship with.

Bank executives, you know, for asset managers, those people that are responsible for managing the bank's assets, the bank's inventory, the bank's real estate. And after the last big crash back in 2007, these are pretty prominent positions in banks now. Like they've got some value there. They've got assets there. Banks used to not manage any real estate at all and would just sell it as fast as they repossessed it or foreclosed on it. They'd have to sell it really quickly. But after this big downfall and that's a big long political conversation.

But they're holding on to more. There's more banks there that are holding it and managing assets. So getting together and forming a relationship with a bank executive or asset manager, good, good idea. Next, it would be property managers. Okay, property managers. So who are their clients? Their clients are absentee owners. Their clients are landlords, right? People that have problems all the time. If you're in that business very long, you certainly will have your number of repairs and your number of vacancies and your your turnover and having to rehab properties and stuff like that. So some people don't have what weren't cut out for that and they like to sell their properties

and get out of this business and go try something else. So there's a lot of opportunity with property managers. Let's see what else. City and county clerks, right? So if you have a good relationship with the city and county clerks, you know, they'll, they're likely to help you with when you're out pulling records. Like you're digging through tax lanes. You're looking for code violations.

You're looking through the probate court file, stuff like that. Other investors, right? So, like wholesalers. They've got problems all the time. They've got the property under contract that they're trying to sell, and they want to sell it quickly. So wholesalers, other investors have inventory. They're constantly, how would you say, reallocating their funds or their resources, and they're buying and selling and rebying.

And so other investors are great to have in your network. The mailman. They know when houses are going vacant where the mail is piling up. So when people move out, the mailman is a great person. Gardner's same kind of situation there. The city and county employees, you know, in Memphis, our Memphis market, we have the guy that is a really good resource for us, sent us a lot of deals over the years, who every time there's a property that gets condemned, he's the one that's sent out by the city to go board

up the windows. So he sends us stuff like that all the time. And we go ahead and if we close on any of those, we send him out a little referral fee because we do that, he keeps sending those to us. Then obvious ones like realtors and lenders and brokers. You want to maintain all of these relationships. And then, yeah, so those are all the different places. The professional services like list brokers and then the relationships that you can build.

And then the records, those are like the areas of how you get access to these people with problems. Got it? So let's just kind of sum it at point one. The problem, you got to define the problem. because you're not going to purchase anything at a discount unless there is a problem there. Okay? It's one on a million if you do. But as long as you can consistently find problems, you'll consistently find discounted real estate.

And the bigger the problem, the bigger the discount. Then you have to define who has the problem or identify who has the problem. That's property owners, anyone that owns or controls real estate. And then number three, to get access to that person, you can go through professional services and buy the information. you can go through and dig through all the records yourself and build that information yourself or you can and or build those relationships and allow that to mature over time. All right.

So here's what there is to do. I want you to search and buy your list of property owners with problems. So you can do business right now. Just go ahead and just do it and understand you're going to have to do it for a little while. But the earlier you start on networking, the less time you're going to have to spend buying that type of information in that data. So go ahead and buy your list of property owners with problems so you can do business now and start networking right now so you'll be able to do business later. Like I said, just don't wait to start building relationships. It's a big mistake a lot of people do because they get so immersed

in trying to do their business. Keep those relationships going. Start now and do so from a place of providing value first. Be a giver with the expectations of receiving nothing in return. That's how the best relationships are built. That's how they go deeper and they're long lasting that way. So be a giver first and do that and you can start doing business and making money now while you build your business and money for the future. So if you like to meet some badasses that have done this in real life to see and hear how they did it, go to epiccasestudies.com. Epic case studies.

All righty? God bless to your success. I'm Matt Terrio. I'll see you next week. Live in the dream. You've been listening to Epic Real Estate Investing, the world's foremost authority on separating the facts from the BS in real estate investing education. If you enjoyed this show, please take a minute to visit iTunes and share your thoughts. Thanks for listening. We'll see you next time here at Epic Real Estate

Investing with Matt Terrio. This podcast is a part of the C-Suite Radio Network. For more top business podcasts, visit c-sweetradio.com.