Epic Real Estate Investing - How to Make Bank Like a Bank by Being the Bank | 1062

Episode Date: June 27, 2020

Join us and learn how to make a bank like a bank by BEING A BANK! Matt Theriault shares 5 HOT PRINCIPLES that will help you jump from landlord to bank on your path to financial freedom! Tune in, learn this strategy to grow cash flow faster, and accelerate your exit from the rat race! 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-ac.com.

Here's Matt. Today, I'm going to show you how to make bank like a bank, even if you're starting with no bank. Got it? Because, you know, I understand that you may be frustrated that you're running out of cash or you're reaching your limits on your bank loans, you know, to buy and hold properties. And you may be frustrated that your cash flow, it's not growing fast enough, not for your taste. and you may be frustrated that, you know, just dealing with tenants. I mean, you can have 10 properties.

And in one of those properties, you may have one bad tenant. And your experience with that tenant, it ruins it for the other nine. Meaning you forget about how smoothly the other nine are working for you because this 10th tenant is such a pain. It's such a headache or she's such a headache. So I get it. And your fear is that this is going to take a little longer than you anticipated. It's going to hurt a little bit more than you anticipated. But when you get this part right, there will be no limits to what you can do with regard to your access to money.

There will be no shortage of money to buy and hold properties. Your cash flow is going to grow faster. You'll have significantly fewer headaches. And your journey to financial freedom is going to accelerate significantly. So, you know, I've got a student who said I could share her story, but she wanted to remain anonymous. and because she's just not really ready to leave her day job quite yet and doesn't want her employer to find out that she is indeed leaving her day job before she's ready to reveal that great news to her employer. So we're going to keep it secret for a little while. We'll call her Kelly.

And Kelly took to this strategy like a duck to water. I mean, she's completed 10 deals and has less than $10,000 of her own money into these properties. and she's cash flowing $6,000 a month. And she's done all of this in less than two years. She's going to do 10 more. That's what she's committed to to do 10 more of these deals. And then she's done. She's done with her day job.

And she's going to decide to travel. That's going to be somewhere between $10,000 and $12,000 a month. She's going to go ahead and travel. And then she's going to continue to build her portfolio, build on top of what she built when she's not traveling. And she's like, you know, she was saying to me, why did I even go to college? Right?

I've thought about that myself several times in my life. And, you know, she said, I could have started doing this the second I graduated from high school and I'd been financially free 10 years ago. So that's what's possible. And it didn't take a giant marketing budget on her part. She didn't do five deals a month. She's not like massively productive and just doing gobs and gobs of deals.

She's doing this on the side. But she's patient. She's persistent. And she just kind of waits for the right deal. to come along. She's constantly looking for them. She delegates a few hours a day to her real estate business and, you know, she just kind of waits for the right opportunity to come along. And she, like I said, she did this entirely on the side and did one deal every other month or so. That's it. And boom. In two years, she's replaced her day jobs income. And in two more years, she will have

effectively doubled that income and then she'll be ready to quit. So that's her story. Let's talk about yours. How do you pull this off? Right? So I've got five hot principles for you today. One, going to give you the strategy overview. What being the bank and making bank like a bank is all about without having bank. And I'm going to go over a second. It's going to go over the source of funds that you can access. Three, identifying your customer. Four, finding your customer. And then five, mitigating your risks and all the headaches. So over strategy overview, like what's this all about? How does she do this? How do you make bank like a bank? That's the strategy we're going to talk about. Source of funds, identifying a customer,

finding your customer, and mitigating your risks and headaches of those five. Which one do you need the most to execute this strategy for yourself? Which one? Which one are you got your drooling over? Which one are you, you know, you're rubbing your palms together like, I'm ready for this, right? Maybe it's all five. Let's give you the whole picture. Okay, let's start with number one. An overview of the strategy. So this is how it works. You find a house and you buy it, right?

In the same manner you would with any other strategy. In the same manner that we've described on this show over the last seven plus years. That part doesn't change. Now, once you own the property, you resell the property by offering and providing seller financing. So you don't sell it outright. You provide seller financing and allow your buyer to buy it from you over time. So when you do this, you are no longer the owner of the property. you are the owner of the note on the property, just like a bank, right?

Just like a bank may be the holder on one of your properties right now, maybe even your primary residence. You've got a mortgage, that bank is holding the note on your property. So you can do this. You can jump from being a landlord to being a bank. Now, the new owner in most cases, and I say most cases because realize with this strategy, it's up to you how you structure your seller financing because you are the bank, right? You get to receive loan applications.

You get to decide who and how gets approved and how they get approved. Because you're the bank. You're the boss. So back to what I was saying. In most cases, you're going to receive a down payment from the new owner. And the new owner will then make monthly payments to you. And that's what there is to do. The new owner, they deal with the property taxes.

The new owner deals with the maintenance and the tenants and everything else that comes along with owning a property. They are the owner of the property, and all of the property owner responsibilities are theirs as well. And one of those responsibilities is to make payments to the bank. And that would be you. That's it. Simple, right? And you can make it even simpler by handing off the collections and the accounting of your payments that you receive. You can hand those off to a note servicing company.

They'll take care of all that for you. And that's a pretty passive stream of income. So that's the strategy. Not saying you don't, you can't, you're not supposed to manage it. You're not supposed to watch it. You know, you certainly want to watch it and make sure that those payments are coming in. But that's about as much work as there is involved after you've completed this whole transaction. That's the strategy overview.

All right. So number two, source of funds, the source of funds to buy the property in the first place up front, right? Again, not a whole lot different here than how you'd normally do it. I mean, you can do this with a conventional loan. You can do it with a private loan. You can do it with credit cards. you can do it with retirement funds, you can do it with cash,

or the cash, the funds, the credit cards, or the conventional loans of any of your family, friends, or associates, right? And you can execute this strategy with all of these methods of funding. And my favorite, though,

method of funding is the seller. And this is how Kelly has done most of her deals. It's how she's completed most of her deals is with seller financing place, using the seller to finance her purchases. And then she goes ahead and finances the purpose.

purchase on top of that financing to a new buyer. So she's creating essentially what's called arbitrage. She might have a $100,000 loan with the seller at 5%. And then she'll sell it to her new buyer, say for $120,000 at 7%. So she's got that gap. So she's collecting more than she's having to pay. And that's how she's been able to do this with the seller financing in place. But you can do it with any loan in place. All right? And even if you did all cash, it's still a really good return on your money.

It's a good use of your money if you wanted to just put in all your own cash. You could always go in and after you put in your cash, you could always refinance it out later. You could refinance it out with a private loan. You could let one of your friends or family associates that they're looking for a return. They can come in and they can buy that loan from you. They can buy that note from you or they can buy the underlying cash you out. They could place a note on it for you.

So then you could pull all of your money back out and go do it again. Right. So that's number two. Number three, identifying your customer. Identifying your customer. This is really important. You got to know your customer and you got to know what they want. So, you know, there's different types of customers.

And this is what I mean. Like, who's going to be your buyer? Is that going to be an investor customer, an investor buyer? One that's going to buy the property to fix it up and flip it. So in this case, what would they want? They'd want some equity in the deal, right? right. So if they were going to fix and flip it, they want to make some money to once they flip it, so they're going to need some equity in the deal. Or your customer could be an investor, a buy and hold investor who wants to hold the property.

They want to rent it out and they want to receive the cash flow. So in this case, what is your customer want? Your customer is going to likely be looking for some sort of decent cash on cash return. Another customer might be someone who's actually going to live in the property, a resident owner, which that would likely be what would be most important to them. is probably the monthly payment. You know, most people when looking for their own place to live, would rather own than rent if all things were equal. I say most people.

There's a lot of people out there that, no, they're just happy renting. They don't care. They don't want to own, but most people do. But they're surprisingly, and I would have never thought this until I started doing the strategy myself, that I'd come across people that were not interested in that proposition. All right, so if you can structure financing terms that would provide a monthly payment similar to what they would pay in rent,

that would be a good customer there and a customer that's in abundance as well. So even though it's not everybody, there's a lot of them out there. You know, there's people that have had some credit challenges or whatever it may be and having difficulty jumping through all those hoops that the banks would require them to do or don't have a credit score that would qualify, but they still want to own property. So there's a lot of those people out there. All right. So individually, that's what they all want.

They each want their own little thing. One wants equity, once wants cash flow, wants once a good payment. Right. And what they all want, however, and I kind of touched on this already, which significantly contributes to the ease of this exit strategy, is the ease and simplicity of obtaining your financing, meaning there's no banks involved. And there's none of those hoops to jump through.

They don't have to go ahead and get all these letters of explanation that the banks are asking a lot for. for for every single thing in your past. They're going to say, well, why is this? Why is that? Why is that? And you got to go find a letter for that. You got to get all your tax returns together.

You got to prove that. You got to pay your debts down. You got to do all kinds of stuff to get approved by the bank. That's a big hassle. But a lot of people are attracted to these types of deals because they don't have to go through all of that that the banks require them to go through. So when you get a property under contract, this is what you want to do. You want to analyze the deal for each one of these wants by your customers.

Right? We've identified what they want. You want to analyze your deal to see if you can provide those wants for your customer. Does it have equity? Can it produce a cash on cash return? Can you finance it creating a payment similar to what it would cost to rent? And once you've done that complete analysis and you know what your property is capable of offering to your customer, you'll know who your potential customers are. So in a nutshell, you have to be clear as to what it is that your customer wants and then confirm that your deal, that your property,

will provide it. Right? So if you can make a match, the rest is pretty darn easy. Now you just have to find the customer. And that would bring us to our fourth hot principle. Number four, finding your customer. And finding the customer here,

it's very similar to how you find your sellers. Right? We look for problems and then we promote our solutions to the people with these problems. So finding your buyer customers is very similar. You want to look for people that are in the market for what you have. That's their problem. Finding a seller finance deal and that then promote your solution. That's your, the solution, your, your seller finance property, you're going to promote that to

them. So they're looking for something that they could finance through a seller so they could own their property. That's what you have. So now you want to promote that to those people. Now, this is really, it's the easiest part of the process. It's become increasingly easier. And we are pretty much in a seller's market. So it's probably 10 times a year's easier than it normally is. But if you haven't done so already, you're going to want to download the epic marketing checklist, the epic marketing checklist. And you do that at epic marketing checklist.com, epic marketing checklist.com.

And just start at the top of that checklist like you would any other deal and you just work your way down. And just make sure in your marketing, you're promoting what's in it for your customer. Remember you've got to focus on what they want that you're going to promote the solution. For example, double-digit cash-on-cash return, seller will carry no banks involved. So that speaks to an investor owner. They get a double-digit cash-on-cash return. The seller is going to carry, and I don't have to go through a bank.

Right? The financing is there. Or own for the same price as rent, every deserving person with a small down payment will be approved. Right? So there you're promoting to a resident owner. So you're saying, hey, own for the same price, it would cost to rent. And then every deserving person, if you got a small down-down. on payment, you're going to be approved. No banks involved. So simple equation,

promote your solutions to the people with the problems, your solution will solve. Now, one thing we're doing with tremendous results is we're using Facebook ads. You've heard a lot about Facebook ads. It's not new news. But boy, it's sure, it works like crazy for this strategy. You know, with the type of targeting that you can do with a Facebook ad, and for the amount of people that you can reach for just a few hundred dollars, I mean, even $100, It's pretty remarkable. I mean, we are definitely living in probably the greatest time ever to be alive when it comes to marketing to people. And for example, we ran a $100 ad in the zip code of where one of our seller finance properties were.

And within seven days, we reached more than 100 applicants on a $100 budget. You got that? In seven days, we got 100 applicants with only $100 applicants. with only $100. So now we've got this huge buyers list for that zip code. So now what does that allow us to do? Or was that to empower us to do? Yeah, we focused a bigger portion.

We carved out of a bigger portion of our marketing budget to that zip code because we've got buyers lined up. So we don't even have to find that great deal there for this type of strategy to work. And we can do really well for ourselves. So that's number four, right? Finding your buyer. And like I said, finding your business. buyer, it's all a matter of just getting exposure.

Focus on the exposure. That creates demand and then the demand drives value. Go to get the epic marketing checklist. That's going to give you maximum exposure, which is going to give you maximum value. Then just make sure on all of your promotions and your marketing that you're taking, what's important to the person that you're looking for and you're putting that in the headline, whether they want ROI, they want equity or they want a low payment and they don't want to deal with banks.

Got it. So that's number four. How to find the customer. Number five, mitigating risks and headaches. So with this strategy, because you are the bank, you have all the security of a bank. Meaning, if your borrower or your buyer defaults, you can foreclose on the property, take it back, and sell it all over again, right? Collecting a new down payment and recasting your loan out however long you want to cast it out. If the property burns down, you get paid

first. Right? Same before, if it's our hurricane, a flood or earthquake, if any of that stuff demolishes the house, you get paid first as the lost payee on the owner's insurance. And since you're the bank, you can dictate what type of insurance your borrow has to carry. So you're not even paying for the insurance. Yes, you need earthquake, you need flood, you need hurricane, you need all acts of God covered under your policy. And they got to pay for it so that you're protected. You get to dictate that. And then the headaches are less too because you're not dealing with repairs. You're not dealing with repairs. You're not dealing with tenant issues because that's all your borrower's responsibility.

So this is an ideal strategy for your properties where you think your tenant pool might require a little bit more of your attention as a landlord where you think you're in a neighborhood where these tenants here are going to, you know, they're going to be maybe cause me a little bit more effort than I'm willing to really put out. But this is a good deal. How do I make money on it? This could be that strategy of how you can put that together. All right.

So if that's the case, it sounds great so far. Like, what's wrong with this? Why not do this with all of the properties you might be thinking? Well, there are many pros out there for the strategy that I've gone over. Like, you know, you get frequently bigger monthly cash flow. So it accelerates your exit out of the rat race. It's a more consistent cash flow, right? Because you're typically dealing with the owner of a property, not the tenant of a property.

So fiscally more responsible in most cases. And then you don't have to deal with the tenants. You don't have to deal with repairs. And so those are all the good parts. But you do miss out on the other three profit centers of real estate. You know, you don't get to benefit from the appreciation. You kind of lock your appreciation in at the beginning. But if you're going to finance this over 20, 30 years,

that property might be worth a whole lot more than what you actually sold it for, even though you made a good profit for yourself. You don't get the benefit of depreciation because you don't own the property, so you can't depreciate the property. And you don't get the amortization. profit center either, in which amortization actually works against you when you're the bank. So it's actually taken money from you in that case. And then additionally, you are not hedged against inflation, meaning if the value of the dollar drops, so does the value of the notes that you're carrying.

Right. And then should you be any sort of conspiracy theorist and you're thinking about the dollar potentially collapsing altogether, that would mean your notes would collapse. well. So there are some downsides. And the other negative part of this would be that the income from notes, it's taxed at a higher rate than the income from the rents that you'd receive if you maintain your landlord's status. So there are some pros and cons. The pros might outweigh the cons for you. Maybe. Because there's a lot of ifs in the cons, except I guess the taxes. So what's the answer. You do both. Right? You do both. Get with your CPA and figure out a good balance for yourself to where you can have the best of both worlds and where the pros and cons can, you know,

kind of hedge against each other. All righty, so that's it for today. See you tomorrow. God bless. To your success, I'm Matt Terrio, living the dream. This podcast is a part of the C-suite Radio Network. For more top business podcasts, visit c-sweetradio.com.