Epic Real Estate Investing - How to Get More Cash Flow When Your Cash Won't Flow | 1063

Episode Date: June 28, 2020

If you don’t know How to get more cash flow When your cash won’t flow Tune in and find out how With Mr. Matt Theriault It’s not A MONEY PROBLEM that holds you back, it’s AN IDEA PROBLEM! Therefore, Matt shows you how to put an idea in place of money so you can generate cash flow through passive income real estate investments and reach financial freedom! Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terrio Media. Success in real estate has nothing to do with shiny objects. It has everything to do with mastering the basics. The three pillars of real estate investing. Attract, convert, exit. Matt Terrio has been helping real estate investors do just that for more than a decade now. If you want to make money in real estate, keep listening. If you want it faster, visit r-e-i-a-a-a-a-a-com.

Here's Matt. Hey there, Epic Investor. It's Matt Terrio from Epic Real Estate, where we show people how to invest in real estate with an emphasis on retiring early. This is the Epic Real Estate Investing Show, and I do this show because I know that most people are living a life of financial sacrifice and betrayal. So what we've done is we've built a system that creates an opportunity for one's

to work harder for them than they did for it, saving them and their families from a lifetime of financial worry. And I know that real estate works, and I believe everyone deserves a chance. And that's why we're here. So if this is your first time here, glad you found us. If you like what you hear,

make sure you hit the subscribe button before you go. And if this is not your first time here, you know the drill. You know I'm very grateful. Welcome back. And thank you for sharing this with your friends and your family. You are the absolute best for doing that. appreciate you. Now, I thought I'd share with you how to get more cash flow when your cash won't

flow, right? Because I've heard from a few people that have decided not to go because, you know, the cash flow thing is not really their cup of tea at the moment. It's really tough to cash flow in their market specifically is where they're a big point. And it's becoming increasingly more difficult in many other markets as well as property prices are increasing at a speed that's outpacing the rents. That gap is getting more and more narrow. And they're frustrated because, you know, they've just got to put too much money down now

to generate a cash flow, to generate positive cash flow. And when they do put enough money down, then what that does is it just kind of kills the whole return rate, right? It takes that ROI and pushes it down. And the idea of investing in a different market, because there's a market won't cash flow, so they're looking at other cash flow markets.

that's either seems like too much work. It's daunting or quite frankly for a lot of people, it's scary. And the big fear is that they're never going to be able to cash flow unless they pick up and move their primary residence somewhere else. But when you get this cash flow game thing, when you get this thing right, opportunities, they seem to appear where there seemingly weren't any before. And you can put minimal money down to generate a solid cash flow.

I mean, the less money, the more cash flow, what that does is that it equates to a higher return on investment, a higher ROI. Your money is working harder for you. You have to put less down to generate the same returns or the same cash flow. And also, you know, and you get it right, you may sleep a little better at night knowing that your investments are within driving distance. And the big aspiration is that you'll be able to exit the rat race. That's what we're all aspiring to do, right? We want to generate that freedom. and the only thing that really generates that type of freedom in the society of which we live is a consistent flow of cash.

Cash flow. So today I've got five hot principles to share with you on how to get more cash flow when your cash won't flow. So five hot principles. Point one, cutting costs, right? Two is changing the use. Three is seller finance. Four is ad conveniences. And five is fractionalizing.

So to increase cash flow, what this is, what cash flow is, it's when the income from a property exceeds the expenses that it costs to keep the property because you've got taxes, you've got insurance, you've got maintenance, you've got vacancy, you've got property management, and you've got, I don't God for a big major repair here and there. So you've got all of those types of things to be concerned about and you just want to make sure that the money that's coming in from your tenant exceeds the money that's going out to your property. Okay, that's the first thing. that's what's really going to generate the income for you or the freedom for you is that

consistent cash flow. But before I go on, and I tell you how you can do this and how you can maximize that or increase cash flow or create cash flow where there isn't any already or isn't any right now is understand and remember, you just can never lose sight of this. When we say real estate has created more millionaires and billionaires than anything else, it's absolutely true. And when we say that real estate is the final frontier where the average person has a legitimate shot of creating epic wealth. Absolutely true. And, you know, it's set more people

free than anything else. Absolutely true. So with that said, understand that cash flow is just one profit center of real estate. And cash flow is not typically the profit center that's going to create your wealth. Your wealth is going to come from your amortization. It's going to come from depreciation and it's going to come from appreciation. That's where the real wealth comes from. Right? So just keep that in mind that, you know, if you're breaking even or you're just slightly lower than, or you're a little negative or you're a little positive, you've got those other three. If you can make that happen and if you can hold on to those properties responsibly and you have the reserves or income from other sources to do it, understand that you're still

moving forward. You're still building your wealth. You're not going backwards. I would never recommend holding a property that negatively cash flows. I would never recommend that. But if you did, if you opted for it, I wouldn't say that you are wrong because you've got those other three profit centers. And if you have the means to maintain the difference between what you're short on that cash flow each month to cover those expenses, then I don't think that's a bad investment. I just don't. Historically speaking, you would have been right every time if you could have pulled through those instances. Okay. So keep that of mind. Now let's talk about the cash flow specifically. That's what we're really talking about.

Because the cash flow is what's going to set us free. That's what's going to replace our jobs income. It's what's going to allow us to enjoy life right now while we're still young enough to enjoy it. All right. So point one, cutting costs, right? So there's two ways you can do this. To create cash flow, you increase the income or you decrease the expenses. So cutting costs.

So look at your maintenance costs. Where can you cut there? Look at property management. Where can you cut there? Look at the utilities. All those types of different costs. Can you refinance and get a lower mortgage rate on the property? Can you go and refinance the private money or the seller's money that you're borrowing?

Can you pay it off and refinance with something, some other source? How can you cut those costs? So always look at where you can cut costs. Right. So that's number one. And the rest of it has to do with increasing income. Right. So number two, point two, changing the use of the property so it generates more income.

Right? So most of us when we think of income property, we think of a tenant, someone that's going to come in and rent that space from you to use as their home. So that's what we all generally think of. But there's a lot more ways that properties can increase income. And some of these are going to be a good fit. Some of them are not. But just listen. Keep your ears open.

And maybe it will inspire some new ideas that I don't even mention. Right. So in some states, in many states now seems like each election, there's a few more states that this is possible. if you change the use from just regular residence, maybe a grow house. Yeah, marijuana, it's, I'm not a fan, I'm not a user. I really don't have an opinion about it one way or the other. I'm very much indifferent about it, but I do see it as potential income and changing the use of your property.

And for you that are not living in a legalized state, it might sound totally crazy and absurd. for those of you that are living in states where it is legal, you just maybe had a light bulb go off in your head and you're like, aha. So I just met with a friend over Christmas vacation, actually a client, and we had lunch together, and he was asking me kind of a similar question like this, and this is kind of what inspired this episode. So Justin, if you're listening, this whole episode is for you.

And, you know, we're in Oregon and it's legal there. And to go ahead and purchase a property and get it all coded for the proper electricity that's required to create a grow house and just make that totally turnkey, that's something that would, someone who's a grower would find very appealing if they just had to move in and everything was already there. They didn't have to Mickey Mouse anything or to go Megshift with anything trying to get it right.

But if you just had it decked out and you made the investment and got all the permits and everything for the electricity and everything, that could be a really viable alternative. And other changing use, Vacation rentals, short-term vacation rentals have become really popular. And inside of the investing space, it's becoming more and more popular. I think by the day, I think, I don't know, the last half of last year, seem like there are six or seven different gurus out there all promoting their little course

on how to do vacation rentals. And they all had their own little twist to it. So that's another way. So short-term rentals, you're renting it out by the day, not by the month. And if you live in an area where, whether it's close to an airport, It's close to a downtown area. It's close to tourist attractions. If it's a place that people would want to go and rest or vacation or anything like that,

that's another very viable alternative. And from what I've kind of seen around looking on the Internet, because I've been looking at it, looked at it, I don't know, here and there for the last few years. And each time I was like, eh, that seems like a lot of work. I don't know if I want to be in the hospitality business. But I still see the income. I see the numbers. And they're very attractive.

And what I've seen is typically it's about, per the day, it's about 10% of what would cost for the month. So if a house rented for $2,000 a month, you could probably get right around $200 a day as an Airbnb rental. So you basically have to rent it out for 10 days a month to be where you were if that was a long-term rental. and then pretty much every day over 10 seems like it would be profit. It would be more than what you would have made if it was just a traditional rental. And that's rule of thumb. It might be different in every area. I haven't looked at every area, but the few areas that I've looked at,

that seems to be really close to the right number. Okay, so 10 to 12 days will get you a break in even in comparison to a long-term rental. And then everything above that, like, if you had another week, I mean, that's just like, you know, you just increased your rent by 50, percent. That'll cash flow in most places. That'll be the difference maker right there. So there's one, or there's two. Another changing use is potential daycare, right? Find, there's a, I know here in Southern California, you see them all over. People go and we'll get their daycare license and they'll just turn their house into a daycare. And if you took a house and turned

it in a nice neighborhood and you turned it into a daycare and you hooked it up with all the amenities and everything that's going to make it child safe and all that stuff, that might be something a business would rent out. And then speaking of business, maybe you turn it into an office space. And you can turn the property into office space or maybe a halfway house, something like that. So those are all different ways that you could turn residential properties into changing their use into, I guess, say, an income stream that would be much bigger than just a traditional tenant. All right. So first was cutting costs. Second is changing the use. Three, to increase your cash flow, you could sell the property. We talked about this last Monday. You could sell the property.

with seller financing. And if you didn't want the cash flow to end, then, you know, go ahead and amortize it over 40 years, over 50 years. That way the cash flow never ends. A person would never pay it off if they didn't have to. And then you, but if you did, you could sell it at a premium because you're offering seller financing. You could lock in your appreciation or your, yeah, your profit.

So if you pay 100 grand for the property and even if it was worth 100 grand, you could sell it for, you know, 110, 120. If you're offering seller financing, people will pay that for the convenience. If they didn't have to come in with a giant chunk of money, they'd have to jump through all the hoops of the bank. They might give you $10, $20,000 down, and they'd be happy to amortize that thing over the next 30, 40, 50 years. Okay.

And I guess in this scenario, if your properties aren't cash flowing, at $100,000, they probably would cash flow. So this would be more in the $200, $300, $400,000 price range. Okay, so you could do that. Um, let's see. So that's seller financing. So you're holding the note for your cash flow instead of the properties, what that comes down to. Point number four, you could add conveniences and charge a premium forum. You could rent your house out furnished, right? Um, you could pay for the utilities and charge a markup. Or you could pay the, uh, charge for the utilities and add premium. So, you know, you add high speed internet. You add, uh, the dish service or the cable network. And, and, and, you could pay the, uh, uh, charge for the utilities and add premium. And, You could have someone come and do the cleaning and you can create an arbitrage there. Other convenience is one of my favorites. This is a biggie is allow people with pets to come and stay in your house.

And don't take a pet deposit. You know why you don't want to take a pet deposit? Because you might have to give that sucker back. You don't want to give the deposits back. So what you do is you charge pet rent, right? So you charge pet rent. You say, yes, go ahead and bring your two Dalmatians and move them right on. in, it's 50 bucks per dog.

So there's an extra $100 in your pet rent. And that goes on and on and on as long as they live there. And a lot of people with pets, they like to stay because it's sometimes it's difficult for them to find a rental that will accept pets. And I'm telling you, that small little shift in that little extra $50, an extra $100 per month, that can kick your ROI up two, three, four percentage points in some cases. Just that little bit can really make a big impact to your ROI. So think about pet rent.

And so, I mean, if you charge, if they had two dogs and you charge 50 bucks a dog, there's 100 bucks, and you might charge, you know, 300 bucks deposit, $500 per dog if you're going to take a deposit. So there you have, there's a thousand bucks. And if they were good pet owners and they took care of their pets and they kept a clean place, you know, when they move out, you got to give that $1,000 back. But if you collected $100 a month and they stayed for two years, That's $2,400 extra dollars that you put in your pocket and you don't have to give it back. Got it? So that's another one part of the convenience. So you can add conveniences and charge a premium and just kind of create that arbitrage for yourself.

So that's number four. Number five, fractionalizing. Fractionalizing. I don't even if that's the correct word, but cutting your property up into fractions and then running out the pieces. Meaning storage. You could sell extra storage space. if you have a big lot, you could put storage units on there

and sell it to somebody else, rent it out to somebody else, or rent it out and sell a premium to the tenant for storage. Let's see. The parking spaces, if you have additional parking on your property, you could sell the parking spaces,

especially if you live next to an event center, stuff like that, it might be good, or if you live next to an apartment buildings that don't have a lot of parking. There's a lot of those here in Los Angeles where I know that it would be very easy if you had extra parking space to rent that parking

because so many of the apartment dwellers got to park on the street and they have to move their car once a week because then they get parking tickets. And over a year, they've pulled up five, six, seven extra parking tickets at, you know, $35, $55 bucks a pop. That adds up. That's the next $300 a year that they pay in penalties

and plus they got the inconvenience of always looking for parking space every time they come home. That would be a very viable solution in your higher priced areas and your more densely populated areas. Another one is selling out the rooms. You know, if you're near a college, you can turn it into student housing and rent the property out per room. So a house that, say, has four bedrooms that rents for $2,000.

Go ahead and rent each room for $700. And now you went from $2,000 to $2,800. And, you know, you might have a little bit more maintenance on there, but you've certainly kept up your, you've increased your cash flow significantly. You can take bigger deposits. You could do better job screening and kind of minimize the downside. of that type of rental, but you could go ahead and split up the rooms and run it out by room. All right. So those are five ideas and maybe they'll work for you.

Maybe they won't. Maybe one will, maybe one or two will, or maybe none of them will. Or maybe some of those ideas just kind of inspired something, stirred something up because there might be something specific to your market, you know, around storage. Like that's a big deal in a lot of parts of the country. But it's not a big deal at all in other parts of the country. So maybe there's something specific, like the grow house thing. You know, maybe they don't grow weed there, but maybe you could rent out the backyard for the neighbor to grow tomatoes.

I don't know. But just kind of take those and take what fits and give it a shot on your rentals or the next time you're looking at a rental. Consider one of those options. Could we do this? Could we do that? Right? Other thing, what do you call it? What's the other one that's a biggie?

You know, if you have the ability to put a billboard on your property or, or, you know, on the house itself, or if you have the ability to rent out for cell towers, there's another thing. So there's all different types of ways that you can increase the income of a property. All right. So, and then you could always do the other thing. You could go ahead and invest somewhere else without moving, right? You could leverage someone else's system, someone else's resources that already has all that stuff in place that can, that could mitigate all of that risk for you and help you, you know, kind of push those fears down a little bit of doing it remotely. But either way, you've got to go for the cash flow.

You've got to make it happen. Don't throw your hands up in the air because it's difficult in your area, right? It's never a money problem. It's just an idea problem. So I shared a bunch of different ideas with you today. Hopefully it inspired something. But if you don't get the cash flow, boy, you're just going to be working for the rest of your life, saving, saving, saving, and the intent in that your pile of money that you save,

gets high enough to where it produces the cash flow that's going to give you the financial freedom. And that's just a long, uncertain path. And if you need any help with any of this, or like you need the type of help where like I don't want to do it, like you don't want to do it. You just flat out want someone to do it for you.

Consider booking a call with Mercedes. Mercedes at Cashflow Savvy. And you can do that directly. You can jump right to the front of the line, get on our calendar at call mercedes. net. Don't put dot com. going to get some different Mercedes.

I don't know where she works. Go to call mercedes.net. And if that's too fast, though, if you don't want to move that fast, you don't want to talk to Mercedes right away, just go to cashflow savvy.com to download her investors package that will illustrate in detail on how you can make cash flow happen for yourself without having to pick up your family and move to a new town. All righty? So that's it for today.

God bless and to your success. I'm Matt Terrio. Living the dream. Yeah, yeah, we got the cash flow. Yeah, yeah, we got the cash flow. You didn't know home for us, we got the cash flow. This podcast is a part of the C-suite Radio Network. For more top business podcasts, visit c-sweetradio.com.