Epic Real Estate Investing - How to Find the Best Markets to Assist You in Escaping the "Rat Race" | Episode 91

Episode Date: March 3, 2014

In this "Living the Dream" series, Goal #1 is to "Escape the Rat Race." Goal #2 is to "Get Wealthy." One step at a time, though... Certain markets and types of properties will assist you in escaping the rat race sooner than others. In this episode, Matt will show you what to look for and how to find these financial freedom markets. FYI: The "Living the Dream" series began on Episode 89. Go back and listen to catch up, in case you missed it. ------------------------- Download Matt's free real estate investing course "How to Do Deals | No Money Required" atFreeRealEstateInvestingCourse.com or text FreeCourse to 55678 "Click" what interests you most:    Education Properties Income Coaching Learn more about your ad choices. Visit megaphone.fm/adchoices

Broadcasting from Terrio Studios in Glendale, California. It's time for Epic Real Estate Investing with Matt Terrio. Oh, yes, it is. It's time. It is time. Hello, and welcome to another episode of Epic Real Estate Investing. This is the show that's going to show you how to escape the rat race once and for all. So you can do what you want, when you want, with whom you want, wherever you want to do it.

That's financial freedom. and anyone can do that, anyone can do that in a relatively short period of time if they just do one thing. And they don't have to do this one thing and you don't have to do it once. So do this one thing one time. And what that is is shift your focus from making piles of money to making streams of money. In the real estate world, that's what we call cash flow. That's what we call a cash flow focus.

And with that particular focus, I personally escaped the rat race unless they're not. than four years. And that's not to say, ooh, look at me. No, I'm not looking for your admiration. I'm already out of the rat race. I want you out of the rat race now. It's, it's, I share that with you because it's to demonstrate that anyone can do this, even someone with no money and a terrible credit score. That was my position when I got started. And that's what I mean by anyone can do this. anyone can do it if someone would only just show them how we know how we now you've you've been taught we've all been taught the same way and we know that that's not working so you got to try something new or else you're going to keep getting the same result so someone just needs to show you

how and all of that financial freedom that's available to you as well i was fortunate enough to cross path with someone that that showed me how and now i spend a great deal of my time showing others the same thing and i'm telling you if i were to get started all over again i'd start the exact same way. I started with two very specific techniques that started to put cash into my pocket relatively quickly, of which I then started converting that cash into cash flow. So if you'd like to get started and take that first step to exiting the rat race, you can download the free course that I created just for you. This course is really built around these two specific strategies that I'm speaking of, and it's absolutely free. And you can access it at free real estate investing course.com.

free real estate investing course.com or you can text free course to 55678 right there on your your smartphone free course and that's all one word by the way there's no space in between free and course so text free course to 55678 all righty got a couple of announcements they come with lots of lots of requests i know this is everyone's favorite part people say Matt, please share another announcement with us. So here it is. The cash flow savvy team, we just got back from our first property tour of 2014, had an awesome time. We visited the Memphis Market, got to meet some amazing people, got to break bread with them,

got to throw some cold ones back, got to tour the city, got to visit before and after cash flow properties. And during and in between all that eating, drinking, sightseeing, we discussed my favorite subject. We discussed real estate. Everyone had an opportunity to pick my breakfast. brain and I picked right back. We had a super time. So if that sounds like something you'd like to do in the future, we've already got our next tour on the calendar. We'll be visiting St. Louis, and we'll be doing that on May 1st and May 2nd. So for the details, and to reserve your spot, you can go to

Epicpropertytours.com. Epicproperty tours.com. And let's see, oh, also a very big thank you to all of you for sending in your testimonial videos for the testimonial video contest. $1,000 is coming to the winner. I was beginning to get a little worried, though, because as of three weeks into the contest, I had only received three videos. But this past week, you did not disappoint. They came rushing in, rushing in with massive volume. And so thank you.

I'm still making my way through those. I know I said I would announce the winner today. But I actually had to record this particular episode a little early this week, as I've had some unexpected traveling come up. So I'm not going to be able to do it on the normal day that I would. So as of this recording, there are still two days left for me to receive some submission. So I have to wait that out, just to be fair. And so, but by the time you hear this, the contest will be over. But that's why I don't have the winner yet. So hopefully understand and hopefully forgive me. So next Monday, for sure. Additionally, I have a super guest lined up, super guest for

next week's episode as well. I'm not going to reveal the name yet as I don't want to jinx it. but this will be for sure the biggest guest I've ever had on this show, this show, or my do-over show. So I don't want to jinx that. So if this is your first time listening, make sure that you click the subscribe button so that you don't miss it. And you won't miss our future episodes as well. And that's probably more important now than ever, as we're three episodes deep into the Living the Dream series, the series all about how to actually escape the rat race.

But not just how to do it, but what specifically there is to do? do as well. And now, let's go ahead and resume that. And if you're just tuning in, go back to episode 89. Start there and then you can catch up. We're not going anywhere. We'll be here. We'll be here waiting for you. This all starts on episode 89. Now, we've talked this far about why and how real estate is the ideal vehicle to get you out of the rat race. We talked about the four basic steps of real estate investing, the importance of leverage and the multiple ways in which you can use it and developing your personal investing criteria and your property criteria so that you can make quick, smart, and accurate decisions. We've gone over a lot of that.

And just so you can have a good foundation and you can make good decisions, the type of decisions that will get you to your goals the fastest. And today, I want to cover a little bit more about your property criteria. Because if you're clear about your criteria, you're going to make better decisions of which results in better investments, of which results in you attaining your goals sooner and more directly and with less pain. And a lot of people, they do ask, they ask me, of course, but I know it's on a lot of people's minds that they don't know where to get started, geographically speaking. So let's talk about property criteria in markets and stuff like that. And, you know, as I've said many times before, you know, before you move forward

and looking for properties, it's really important to first determine your long-term goals and the real purpose of your investing career. Because once you're clear with that, then, you know, looking for properties makes a whole lot more sense, at least where you're looking for, for them. So for this purpose of the series, I'm just going to make an assumption that the primary goal is to first exit the rat race. That's the primary goal. And what that is, that means is getting your rental income, your cash flow, to exceed your expenses, and your regular expenses. So your normal cash flow, your normal rental income pays for your life. It pays all the expenses that accompany you. And when that happens, it means you don't have to work for anyone

else ever again. You know, as long as you maintain your cash flow, of course, you never have to work for anyone else again. You don't have to quit your job, though, when you hit there. You can if you want to, but you don't have to, but you'll have the option to. And by having that option, you are no longer in the rat race. Make sense? You can tell all those rats to take a hike whenever you want. You don't have to win that race either. It's not a race you even have to compete in. You don't need that race or to win that race like everyone else does to create a nice life for yourself. You can certainly choose to, and there's nothing wrong with that, but goal number one is to create the option for you to work for someone else or not.

You've got options. And from this point forward, I'm going to refer to that option as just escaping the rat race. So if escaping the rat race is enough for you, you can certainly stop there if you'd like. But if you want to go after the secondary goal, I'll show you how to do that too. And the secondary goal is to become wealthy. And again, I'm going to keep this very simple. and refer to that second goal as becoming wealthy or getting wealthy. You know, what you do with that wealth entirely up to you.

Okay, you can tie it more to your church, you can build a batter women's shelter, you can leave a legacy to your children, or you can go out and buy 73 red corvettes. Yes, you can get all red if you want. What you do with your wealth is entirely up to you. We're just going to call goal number two, get wealthy. Okay, goal number one is escape the rat race, have any option to work for someone else or not. And goal number two is get wealthy. Escape the rat race first, get wealthy second. And getting wealthy second, have a whole lot more options, right? Cool. So now that we know

we're going after, it's time to think about looking for properties. And this begins with the development of specific criteria for the property, including factors of location, property type, property condition, features and, you know, economic conditions, all that stuff. Be sure to stick to your criteria, by the way. That's why we're going to establish this. So you have something to stick to you have guidelines so you you have a compass so to speak okay so the right location right property you know you all heard the uh the old real estate joke states that you know the first three criteria for good real estate investments are um or just real estate in general are location location location and location and that's not far from the truth actually i mean the physical

location of the investment property is absolutely crucial to a resident owner i mean to where you want to live. I mean, that's crucial to where you want to live. This is where you're going to spend your life. So the location is extremely important then. But what makes a location attractive to investors? Still important, but maybe not the exact, maybe not the same criteria with regard to location that makes it important to investors or attractive to investors. So one of the, one of the bigger factors you'll hear is the proximity to your home and or work, right? We've talked about this a little bit in the past, actually fairly recently. How far away is it from your home? Can you drive to it. That type of proximity is what I'm talking about. And so personally, I mean,

the most attractive location to me is anywhere that the property will perform with minimal participation on my part. That's the location that I want. You know, within reason, of course, I do have standards. I certainly stay out of war zones. And I shy away a little, although it's not a hard and fast rule written in stone, I do prefer warmer climates or where it's warm most of the time and the winters don't tear up the property too much. But the reason that that's not a hard and fast rule for me

is because there are a good number of exceptions to be found, right? I mean, for example, I've got family doing very well in Buffalo, New York. They're investing in Buffalo, New York, and killing it. And then there's a lot of buzz right now about North Dakota. Maybe you've heard? just might have to adjust the strategy a bit, but, you know, I'm getting off track. What I'm saying is I think differently than the conventional real estate investor thinks

when it comes to location. As long as I have a reasonable amount of confidence that a property will perform to my minimum deal standards and will require a minimal amount of my time, that property will get my consideration. Now, if I can find properties in my own backyard that fit that criteria, then I would prefer them to be close. I would prefer that in my own backyard. But at this time, I can't find properties in my own backyard that meet my minimal deal standards. So I look elsewhere. No big deal. Just got to go somewhere else. Doesn't mean I'm just going to quit because they're not in my backyard,

right? That'd be silly. Now, I do think it's a good idea, though, for most new real estate investors to be close, close to their home, close to their home or their work for those first properties in order to get some, you know, some hands-on experience of, say, maintenance and management or even just deal acquisition. But again, if you don't have the time for hands-on experience, just like if you don't have, if you don't live in the ideal location for your type of investing, the answer is not to don't invest. You know, that's not the answer.

No, the answer is to look for an alternative solution, maybe like leveraging other people's expertise and efforts like we talked about last episode, or look for a location that does meet your investment needs, and then leverage other people's expertise and efforts. Okay? So whether in your own backyard, your city, your county, your state, or even within your country's borders, one way to begin is to simply start exploring. Just get curious. Start getting familiar with different areas and different types of areas. There are a number of ways to do this, including, you know, driving through it at various times of the day, talking to residents, frequenting the areas, shops and restaurants, and doing research to learn important things

about the location. Personally, this is where I recommend you start. I would start attending real estate investor clubs in various areas and travel if you have to. By all means, travel if you have to. This is an important decision and you want to get it right. And a lot of times when you're looking at people face to face and you're shaking hands and kissing babies or whatever it may be, a lot more can be revealed than just a phone call or some internet research. But travel if you have to go to these clubs. And when you attend these clubs,

these meetings, go ahead and mingle. Ask people where they're investing. Ask about their successes. Ask about their challenges. Ask why they chose those areas. I'm a really big believer in following success. You know, you know my position about a mentor. You know my position about creating your environment. I'm also a big believer in following and doing what works. And if someone has gone there and done that before and it's working for them, if you do the same thing and the same way is likely to work for you as well. If you meet an investor that's currently having massive success in Timbuktu,

then it may be worth your time to go there and confirm. Leverage other people's success and then do your own research in addition to that. And your research may include finding out information about schools and safety and desirability and access to public transportation. What kind of shopping is in the area? What do they have for restaurants? If you're going to visit, you've got to need a good place to eat. What are the grocery stores look like?

How about the postal services? The recreation facilities, the standard house construction. What do the typical houses look like? The common family types. Who lives there? Neighborhood organizations. Neighborhood pride. Is that relevant or is that visible?

You know, what are the typical sales prices? And the biggie for me is industry. Where are this location's residents working? Is there stability there for these residents to pay their bills and maintain their housing? But you want to take all that stuff into consideration. And you can also start looking for sales science to see what kinds of opportunities are there and get an idea for market values. And after you've taken notes on a few neighborhoods, you can begin to compare and see where your

best choices lie. Specifically, which area or areas are going to get you to your primary goal the fastest. Of course, it's not necessary to narrow it down to just one area either. You may find two or even three neighborhoods that might suit your purposes. And actually, if you can find more than one neighborhood, I think it's a good idea to geographically diversify your holdings, geographic, you know, diversification. it does two things that that I particularly find appealing. First, it's a hedge against the unexpected or the unproductive, the types of things that

you can't manage. That's why I like diversifying geographically. The second thing is it just presents more opportunity. You've got more, I guess, more attempts at the plate. You get to take more swings. You get to choose more balls. Maybe if you just want the fastball, then if you're looking at more balls come down the pipeline, you know, you can dodge all the curveballs without any worry,

and you can just sit there and wait for your fastballs. And if you're expanded out more geographically, then you've got more of opportunity. It's not a bad idea. Actually, it's a good idea to have some options. Very good idea. And keep in mind, the very best of neighborhoods, they're pretty tough to invest in. You know, they're tough to invest in because they attract affluent residents. and the type of residents that want to stay there, that don't want to move.

And if they don't want to move, because it's a good neighborhood, there's likely a higher demand there. And when there's higher demand, that means there's higher competition. When something does come up for sale, and when there's competition, we know what that does. It drives up the price. So a lot of the best neighborhoods are tough to invest in. Additionally, if your goal is to escape the rat race sooner rather than later, the better the neighborhood, the higher the property price. and unfortunately, the market rents typically just don't rise in proportion to the purchase price,

of which results in lower cash flow. It results in lower ROI. You know what that means? It means you stay in the rat race longer. So keep all of those dynamics in mind. If you're sitting there waiting for perfection, you know, even if you find it, it still might not get you to where you want to be when you want to get there. I personally like lower income neighborhoods.

The purchase price to rent ratio works very very. very well, especially in today's market, and more on that as we go. But if I can find a good cash flow deal in mid-income neighborhoods, I'll jump all over it. But finding them is much more time and resource intensive, and I don't want to wait. I want to continue to increase my cash flow. I want to continue to increase my net worth. So most of my time is spent looking for deals in lower-income neighborhoods. Not war zones. No, I avoid those like the plague. I don't want to go there. I don't be afraid to go to my property, but low-income neighborhoods have worked very well for me. There's very good people living in lower-income neighborhoods.

Now, mind you, at this point in the series, we're only trying to get to our primary goal, escaping the rat race. Once you've escaped, you'll likely be, you don't have to, but you'll likely be modifying your location criteria a bit to achieve your secondary goal. Get wealthy, okay? So I look at lower income neighborhoods. is great places to start and they're great places to hang out for a while while you're, you're increasing your cash flow while you're getting to the point where you can escape the rat

race, where you have those options, the option to work or not. Got it? Then as you go along and you hit that point, then you can start expanding your location criteria or raising your standards and pursuing that second goal, getting wealthy. Now, the type of property talked a lot about the location. Let's talk about the type. Should you attempt, you know, to, you know, to find single-family properties or multifamily properties. That's a big question. Comes up frequently. And both property types, they've got their advantages.

There's some disadvantage there, too. You know, single-family homes, they tend to benefit more from appreciation. But multifamily properties offer multiple streams of cash flow and often at a higher return on your investment as well. And this typically means that single-family homes are usually the choice for investors who are focusing on building net worth. while multifamily properties are the choice for those who are seeking to maximize their cash flow. And, you know, while multifamily places have the potential to bring in multiple rent checks,

you know, the extra occupants have the potential to create more wear and tear on the property. Well, so what I'm just kind of trying to get at is while no choice is absolutely perfect, some careful consideration will help you to make the right choice at the right time, the right choice for you. personally, I diversify here too, not just in location, but I also diversify in property type. You know, I'm investing actually in a few markets where I feel I'm getting the best of both worlds with single families. I'm getting great cash flow numbers with also the great potential of increasing my network through eventual appreciation. You know, every market is different, though, and the properties within those markets perform differently.

And all that to say, just be cautious of the hard and fast rules like, you know, invest in single families, for net worth, multifamilies for cash flow. You're going to hear that frequently. I've broken both of those rules and broken them with no real extraordinary effort either. Just remember the answer to every real estate question is it depends. Got it? Now, with regard to property condition, you know, even a property of the right type in the right location is not necessarily a good choice if it's not in the right condition.

And the condition of the property is it's a significant factor. But the desired condition depends upon your goals, really. It depends. There's that word again. It depends on your goals. It depends on your resources. It depends on your skills. Depends on your time.

You know, while homes that are in perfect conditions certainly have their advantages, they also tend to be much more expensive. You know, older homes and homes that require repairs can be the best choices if you can use those factors as, you know, say bargaining chips to reduce the price, to create equity. And you can do that. that if you can reduce the price and you can manage those repairs, those can be some of your better investments. You know, we just got back from Memphis and, you know, we're looking at homes from, God,

they're built 30, 40 years ago. Of course they're going to have issues with them. They've been standing there for 40, 50 years. And they're going to be standing there for another 40 or 50 years. So keep all that in mind. It's just because it's nice and pretty and it's something that you want to live in, you know, maybe it's a nice home and a nice area, but it might not be, make a nice. investment. Okay? Maybe because it is so nice and it is a nice area, you know, all the potential

for growth has been removed, right? Because it's already grown. It's done. So keep that in mind when you're looking at properties. So repairs are in the condition of a property are often, you know, the basis for a negotiation of a lower price, which can potentially, you know, save you thousands, hundreds of thousands. Depends on your market. It is important, however, to to be realistic about your ability to get the repairs done in an efficient cost-effective way, either by whether you do them yourself or by having someone else do them for you. Repairs take time, and time is money. So keep that into consideration.

I mean, it's really, it's very much a matter of assessing the balance of time, money, and effort in order to making the right decision for you. To finding a good mix between, you know, property condition and price. ideally you want a property that needs enough repairs that you can negotiate that price down but not so many repairs that the place will be too much of a drain on your time or money got it okay i think i've beaten that horse now amenities and features there is a a difference between amenities and features features are the the basic facts like number of bedrooms stories and bathrooms or the presence of a garage or carport. These factors are really only significant in terms of how they compare, though, to the

features of the other houses in the area, the comparable properties. I mean, it's important to know the features of the average houses in the neighborhood so that you have a baseline of comparison. A property that has more bedrooms or bathrooms than its neighbors or has an attached garage when the other houses have only detached carboards, that might be especially attractive as a rental property. On the other hand, if the property does not stack up well against the standard homes in the area, it may not be as attractive. However, amenities, amenities could make up for those detriments. You know, amenities are the extras that are not typically standard. It's like, I don't know, swimming pools or custom cabinetry or saunas or, you know, nice tile or whirlpools, stained glass,

highly energy efficient modifications, or other special elements that are noteworthy. And there's a lot of different amenities you can do to make the place look nicer. You upgrade the carpet. You put in wood flooring, whatever it may be. And, you know, something like swimming pools. Those are considered a liability by some. So their value may be relative depending on the circumstances. Other places, the swimming pools are very much an asset.

And, you know, in some cases, the amenities may offset any deficiencies in terms of features. A house with only two bedrooms in a neighborhood where the average is three may still attract a very good deal of positive attention if it does have a pool. If it happens to be in Phoenix, happens to be in North Dakota, maybe not so much. So if the property is on par with the neighboring houses and it has impressive amenities, it has some serious appeal. Personally, though, what I've found when it comes to nicer amenities, they likely won't pay for themselves through an increased rent. A lot of people think that they can put in, you know, nice tile and nice cabinets and they're to get more for rent. You might get a little bit more, but not enough for it to pay for the extra

expense that it took to put in the nice tile and cabinets. But what the amenities can pay for, how they can pay for themselves, is over time due to tenant retention. The tenant doesn't want to leave because it's nice and it's comfortable and it's nicer than anything else that they can get in the area. So that's a way that it can pay for itself, but it's going to take over time. So don't try and, you know, put, you know, sub-zero refrigerators in there and a new jacuzzi in the backyard and think you can charge $300 extra per month. That's not going to happen. But it can pay for itself over time because you have the tenant's going to stay there longer. So you're not going to have the turnover expenses. You're not going to have any vacancy issues. And it can pay for itself that way.

You know, and if you can, and as long as it doesn't mess up your investment numbers, you know, go ahead and spruce the place up a little bit with nicer amenities. You know, kitchens and bathrooms are the obvious places you probably want to put your money. That's what it's going to be best spent. But having said that, just don't go overboard either. Okay? Specifically, don't set out to make the dream home. You're not living there.

Got it? This is an investment. There's a very big difference between your primary residence where you live and spend your time and raise your family and your investment dollars at work. two entirely different looking houses and different neighborhoods. They don't have to be, but frequently they are, typically they are.

It's just your investment, okay, let's put it this way. Where you live, that has everything to do with your quality of life, your comfort, where you spend most of your time. With your investment,

it's a math equation. It's a short-term equation and it's a long-term math equation. Got it? Two entirely different thoughts about purchasing those two types of properties. And, you know, last note, get familiar with the amenities inside other rentals in the area. That could be a huge indicator of what you should and shouldn't do. Because what you may find,

and most of the times you will, is that you don't have to spend a whole lot of money on amenities to create a more appealing rental property than what your competition is offering. Maybe you just have to do a little bit more and you can really stand out to potential tenants prospective tenants. You know, in our Cleveland market, I've been in a few houses out there and I've seen that it's not uncommon to see two by fours as making or serving the purpose of a banister for the stairway. And to me, I was kind of dumbfounded when I saw that. I was like, wow.

I'm certainly not going to put two by fours in my house. But once you walked into several of those houses and you see that's kind of the standard, then all of a sudden you don't have to do too much more to stand out if you're getting the picture. Okay? So make sure you know what the competition is offering because maybe you don't have to put imported tile and you don't have to put in fancy schmancy cabinets. Maybe just a cabinet at all with a door and a handle on it. will be better than your competition.

Or maybe you've got to go and import oak from Italy to compete as well. Okay? So know what your competition is offering and adjust your rehabs and your modifications to the properties accordingly. Stand out a little bit, be a little bit better. Just don't go overboard, okay? Because it's not going to come back to you financially, at least not immediately.

Could overtime, but that's a big could. Got it? All righty. Next week we're going to go ahead. We'll pick up from here. You've now got a good idea on where and what type of properties you're looking for. Next, I'm going to show you how to find them. Specifically, I'm speaking of a lead generation, how to create those hot leads. Okay? Oh, but wait,

next week. I've got that super special guest for you next week. And I've also got the video testimonial awards for you too. So this is what we'll do. We'll take a break from our Living the Dream series for one week, for make room for our special guest and for me to hand out the awards. And then the following week, we'll go ahead and we'll get back into the series and we'll discuss generating leads. Good? Cool.

All right. Definitely. So you don't want to miss the next two episodes. So make sure you click that subscribe button and leave your nice thoughts in the form of a review over at iTunes while you're at it. Kill two birds with one stone. It'll make for a good exercise in leveraging your time. So thank you in advance for that.

That's it for today. I'm Matt Terrio, living 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-desweet Radio. com