Epic Real Estate Investing - Infinite Returns with Creative Financing | 1060

Episode Date: June 25, 2020

In today’s episode, Matt shares a deal that he recently closed using creative real estate investing! Moreover, in this exciting arrangement, he didn't use a dime of his own money or point of credit, thus leaving him with an infinite return on investment! Tune in and find out more! 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's.com.

Here's Matt. Hey, their 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 here is we've built a system that creates an opportunity for one's money to work harder for them than they did for it, saving them and their families from a

lifetime of financial worry. I know that real estate works, and I believe everyone deserves a chance. So that's why we're here. And if this is your first time here, really glad that 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 how I feel about you. Welcome back. Thank you for sharing this with your friends and family. You're the absolute best. I've got a special episode for you today as there's, you know, there's just still a lot of uncertainty in the economic and social ethos at the moment. I mean, there's developing stories by the hour, it seems. And it's getting really tough to discern what deserves your attention and what doesn't. And it really all just comes

down to distraction, right? I'm fighting it myself constantly. But, but, but, but, you're fighting, But I received some of the best advice ever for my productivity and for my perseverance and for my stick-to-itiveness. Some of the best advice of my life during a downtime, probably 13, 14 years ago now. And it was to stop focusing on what's happening and focus on what you want to have happen. whenever I get a little flustered or a little worried or concerned or I feel like I've been derailed in some way or just anything where it's not going the way that I'd like it to go, I say those words to myself. Stop focusing on what's happening and focus on what you want to have happen. And that just kind of redirects me back into the right mindset in my actions, the appropriate. actions follow. And I find myself saying those words to myself more and more these days,

you know, over the last few months. And they're proving to be just as powerful as when I first heard them. And I wanted to share with you the result of that type of thinking. And I wanted to share with you a deal that I just closed. And I want you to know what's possible when you're focused on productivity, when you're focused on what you want to have happen. And when you're focused on the results. I just released a YouTube video today of the inner workings of a deal that I closed last week. And if you'd like to see the video, you can at epic rei.tv. And it's a really important video, I think, for right now, because I closed this deal last week amid all of the economic and social turmoil. And if you'd like to see the numbers and the pictures and an overall visual

explanation of how it went down and how this deal I was able to achieve an infinite ROI, please go to epic r-ei.tv, and you can take a look and you can just look for today's video. It's creative financing real estate, infinite return on investment. And in case you didn't get around to it, or you don't get around to it, and I want to play the audio from it here, because I want you to know what's possible when you use your creativity more than your wallet. And so you don't end up being the guy who commented just under the video. Sorry, but folks will never be able to find a vendor who will wait 100 months for the rest of the money. Why would he? If he is selling at almost 10% below market value, he'll get a buyer pretty soon. That's the comment. I think it was

the first or second comment under the video. And this guy with this mindset will forever go to banks for his money and pay full retail through a realtor. And I want to protect you from that. And I want you to know what's possible right now in this environment. So, enjoy. I got a message last week from a podcast listener asking about the creative deals that I do. And he wanted to know how he could listen in on the phone calls, read my agreements and most importantly, learn the thought processes behind the acquisition and the disposition strategies. And I had happened to close a creative deal the day before that started with almost zero equity in cash flow and I was able to pull out $10,000 at closing and get the property to cash flow for my portfolio.

And it's a nice property too. And I didn't use one dime of my own money to do this deal or one point of my credit score, leaving me with an infinite return on investment. So Mr. Tico Blaine, I appreciate you listening to the podcast watching here on the YouTube channel. And to show my gratitude, this one is for you. And before we begin, click the subscribe button. Let's go. Hi, my name is Matt Terrio. I am CEO of Epic Real Estate, where we show people how to invest in real estate with an emphasis on retiring early. And I'm going to walk you through a deal that I just closed that will give you an idea

as to how an early retirement is not just possible, but with a little bit of know-how and some consistent and persistent action, early retirement is probable. So I got a phone call about a month ago. At least 50% of our deals come to us this way now through referrals and relationships. Don't keep what you do a secret. Let people know and send handwritten personal notes to your contacts and text them on holidays. This is the bare minimum of keeping my relationships intact. And after years of doing this, I don't really spend a whole lot of money on marketing anymore.

We just don't have to now. Because when my mentor told me this was a people business, it clicked. So lesson number one. If you want to go fast, market. If you want to go far, mingle. If you focus on both from the beginning, you'll find the less and less marketing you'll have to do. to get the results that you want. So this property, it's in Birmingham, Alabama.

And I found comparable sales to support a $143,000 fair market value for this property. The seller was asking $129,900, and he was pretty firm. Seemed to be in great condition, having just been rehabbed, and it was vacant at the time, and market rent was $1,200. At first glance, there's essentially no equity here. I mean, maybe $13,000 spread there, but after closing costs on the buy, then the closing costs on the sale and then the days on market and then the marketing expense, there wouldn't be enough left for it to really be worth the hassle.

And at $1,200 of rent, the rule of thumb for a property to cash flow, the market rent must be greater than 1% of the purchase price. So this doesn't quite meet that 1% rule. That's lesson number two. To make money in real estate, you need equity or you need cash flow. Preferably both. So if this deal has neither, I have to create it. And that's lesson number three.

As long as you can control the price or the terms, you can always create a deal for yourself. If you'd like to see how I do that, go ahead and smash the like button to let me know. Since the seller is firm on the $129,000 price, I have to be firm on the terms. My offer, of which I sent quickly via email, was 10% down and 100 monthly payments of $600. And I chose that number quickly just based on its half the market rent. And the full balance would be due on the 101st payment. The idea was, with my quick and dirty math, this would give me a positive cash for it. And because I didn't offer an interest rate, I'd create equity pretty quickly with these $600

monthly payments. A couple of days later, I received a no thank you. I never liked to let a deal die without at least getting a counteroffer, so I replied with my typical response, how far apart are we? And this wasn't typical communication, by the way, because it's almost always over the phone, but I was really busy and I didn't think there was a bunch of motivation here anyway, considering he was so stuck on the price. To my pleasant surprise, a couple of days later, I received a count.

offer of 129,900, 20% down, 5% interest amortized over 30 years with a balloon payment due in five years. Not a terrible deal. My quick and dirty math here would have this at approximately a 7% cash on cash return, but nothing to get excited about either. And with having to come in with $25,980, I could pick up at least two properties with that amount. So there are some opportunity cost to consider there. Needless to say, I wasn't too excited about it. But, Never to let the ball bounce twice in my court, I countered back anyway with 15% down. A 30-year amortized loan, years 1 through 2, I'll pay 3.5%. Years 3 through 5, I'll pay 5.5% of which the loan would be recast at year 3, making adjustments

for any principal pay down in those first two years. With the balloon payment for the balance due at the end of year 5. And then, because the property was vacant, and there's some uncertainty at the moment around finding tenants, I asked for a six-month moratorium on the first payment. to give me time to find a tenant. And that will give me a potential first-year cash-on-cash return of 29% if I could find a tenant quickly, much better than the previous 7%. And I was pretty certain I could increase that even more before we'd close.

And I did. And I'll show you how I did it in just a sec. If you'd like a list of the 21 creative financing terms I most frequently use, plus 10 deal structure templates that inspire my offers, you can grab them for free at epic breakthrough.com. So I hit send on the email and to a little bit of my surprise, the seller accepted. Deal. We were in contract. So I ordered my physical inspection. It came back pretty clean, about $3,500 in minor repairs, had a local agent run a market analysis, and she was able

to confirm the $143,000 value. And then once title was confirmed clean, I took the repair estimate back to the seller and was able to negotiate a $3,500 maintenance credit, which reduced the amount of money I needed to close from $19,485 to $15,985. I then, went into my database of private money sources to see if anyone would be game to get in on this by providing the down payment. I figured with a 20% plus probable cash on cash return, there was enough to share. On my very first call, I was able to arrange a $26,000 interest-only loan at 6%. So, my cash flow numbers look like this. $1,200 per month gross rent, less insurance of $68, less management fees of $120, less property taxes of $120, and allocating 10% for vacancy and maintenance

of $120, that leaves me with a net operating income of $778. And after the first loan payment of $495 and the second loan payment of $130, my cash after debt service is $153 a month. That's my cash flow. And since I have zero money in the deal, that 20-something return is now an infinite one. Now, this is not a home run deal, but with minimal effort and zero money out of my pocket for a really clean property in a great neighborhood, I did collect $10,000. is it close. I'll collect $153 a month in positive cash flow. And I was able to find a tenant before

I closed escrow and they'll be moving in in 30 days. So I'll have five months with zero payments due to the payment moratorium. And I'll make monthly payments to the seller anyway as if they were due to chip away a little bit more at the principal. And I'll take the proceeds from my next flip or two to pay off that second loan. And then what I'll do inside of my CRM is I'm going to set up a six month reminder. So every six months, I'm going to call up the seller to offer a discounted payoff of the first. And I'll make that call every six months for the term of the loan until they take it or the term expired. See you next time. Yeah, yeah, we got the cash flow. Yeah, yeah, we got the cash flow. Yeah, yeah, we got the cash flow.

You didn't know, home boy, 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.