Epic Real Estate Investing - Long Distance Real Estate Investing is an Unfair Advantage That No One is Telling You About... | 471

Episode Date: September 15, 2018

You’ve heard it a million times. "If you can't drive to it, don't buy it!" Are you sure? Listen to learn the advantages of long distance real estate investing, Mercedes and Matt’s real estate philosophy, and how to control a long distance property. Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terrio Media. So you want to be a real estate investor, but you don't want to do the work. If there were only a way where someone else could do it for you, now there is. Tune in here each and every Saturday on the Epic Real Estate Investing show for Turnkey Saturdays with your host, Mercedes Torres. Hello, hello, and welcome to Turnkey Saturday. A new podcast brought to you by Epic Real Estate Investing. My name is Mercedes Torres and I am lucky enough to be partners in crime with Mr. Matt Terrio,

creator of epic real estate and the epic empire. If you're just now turning into our Turnkey Saturday show, Matt and I decided to create this segment of our podcast, not only because we see a shift in the market and the demand that it's bringing to Turnkey, but the show is really catering to. to real estate investing for busy people. Now, if you're unclear as to what turnkey real estate investing really is, I invite you to go back to listen to the previous episode where I went into great detail about turnkey real estate investing. And I further share, and more importantly, three types of people that are absolutely crushing it with real estate turnkey investing. You know, you actually never know if you could be one of those types of people.

That might be you and you don't even know it. Now, it would be ashamed if you were losing out on opportunity or even worse, your financial freedom. So the previous episodes will pretty much reveal the gist of the show and what it's all about. And I invite you to go back and listen to those previous turnkey episodes, It's Trinky Saturday episodes. So speaking of previous episodes, you know, Matt and I just got a phone call in the office a couple of days ago from a reporter that was inquiring about a topic that we recently discussed

on a panel at a real estate group that we recently spoke at. And this reporter asked if the sources of our numbers that we shared, specifically pertaining to 401K balances, because it was... they report to be hitting a record high. So she wanted to know, you know, what were the sources and if they were credible? And before Matt and I speak anywhere, we always verify and confirm our latest figures. And we certainly seek information from credible sources. So just before I started recording this episode that you're listening to now, I did a few searches to see if I can find the sources again. And here's what I found and actually,

newer information from what we shared at, at our previous group that we spoke at. But as recent as a couple of months ago, now, I won't go through everything and I won't recap what we discussed in the previous episodes. But the headline from Fidelity Investment from just the second quarter was that 401K balances hit a record of $97,700 last year. Now, I'm sure the surging stock market helped boost the average 401K because there was a 9.6% gain from just $89,100 just about a year ago. Let's be honest, though, many young and low-income workers are not doing such a great job at keeping cash in their accounts. There was a big leap from 77,300, which was the average

five years ago, according to the annual tality at Fidelity Investments. But most of the boost came from the stock market gain as all three major stock indexes ended the year with more than 20% higher than previous. Now, according to CNN money, people on the the verge of retirement, so that's ages between 55 and 64 years of age, have an average 401k balance of $104,300, which is up about 13%. According to Fidelity investment, the savers, those that have both the 401k and an IRA, an individual retirement account, they have an average of 104,000 3,000.3,000,000, $300 in their 401k and $106,000 in their IRA for a whopping grand total of $210,300. I mean, did you hear that figure?

$210,300. That is hardly enough for a comfortable retirement. I assure you, many Americans are woefully unprepared for retirement. I mean, according to the National Institute of Retirement Security, almost 40 million households have no retirement saving at all. People, this is a serious problem. Serious. Now, again, I'm not going to recap the entire conversation that I have.

on the previous Saturday episode. But the point is, the reason we bring this up at all, even with the surging stock market, the majority of our population isn't even in the ballpark of living at poverty line once they retire. They surely are going to need some type of assistance living. Now, that could be Social Security, that could be other government programs,

maybe Veterans Association, if they served our country at some point. They could depend on a church. Heck, they can even move in with their children because that may be the only option. Or they can always continue to work. Now, last week I talked about the greeters at Walmart. Not that there's anything wrong with the greeters at Walmart,

but most of them happen to be senior citizens. We need to think about, are they working at Walmart just to give them something to do? or are they working at Walmart because they absolutely have to? That is the only way that they can make ends meet. Regardless, the bottom line is the numbers just don't pan out when your strategy is to save for retirement. I mean, you just can't possibly save enough.

Even if you don't take into account the fact that the government puts restrictions on what you can stock away for your retirement, even if there wasn't a limit, you just have to save way too much and make way too many sacrifices just to get there. Even with the stock market hitting a new record high every month or so, savings just isn't enough. People, the answer is not to save a pile of money. The answer is to create a stream of money. And there's no more predictable way of doing such than with real estate investing. It's simple. And speaking of saving and being a losing strategy, I'm not sure if you've heard one of our previous episodes, but a few years ago, Matt and I had the opportunity

to sit down and discuss with the author of the phrase, Savers are Losers, Mr. Robert Giansaki himself. So Robert Kiyosaki in his book, Second Chance, talks about how savers are losers. Now, again, if you have a chance to listen to that interview, it's right here on the Real Estate Investing podcast, go back about a year or so. But if you did the math, I mean, it's not working.

As if the Mac wasn't bad enough, taxes and inflation will snatch more than half of whatever you managed to save. And during our conversation with Robert Kiyosaki, you know, we were lucky enough to sit down beforehand and afterwards. So we talked about an hour before the recording and then an hour afterwards. And he said something that I just wouldn't have expected to hear and Matt and I were floored when he kind of shared this. But he shared, I'm not a real estate investor, guys. He said, I'm a tax and debt investor. He just kind of happened to share that real estate investing

happened to be the best of both worlds. So, I mean, if you think about it, it provides the greatest tax breaks for sure. And some of the most important and powerful uses a debt. So real estate does provide that. I mean, you can absolutely shelter taxes with real estate investing. So real estate is like a trifecta when it comes to creating, creating financial freedom. Real estate is an absolute trifecta. It creates streams of income that you need. It creates tax breaks. and you benefit from leverage and the inflation hedge that debt provides.

And he even went on to say that it's a reoccurring theme in his book's Second Chance, and if you have a chance to read that book, it's a great book. But he went on to say that taxes and debt keep the poor poor and make the rich richer. So if you don't understand how that happens, you really don't need to. trust me. Took me a little bit to wrap my head around it, but I think I got the gist of it. Longer the short of it, you don't really need to understand it. Just buy income real estate, manage it, or have somebody else manage it for you, and the rest will take care of itself. Okay, so back to the original question. Where do you buy this income real estate?

the type that will create dependable and predictable streams of income, provide you with all the tax benefits that real estate does, and allows you to leverage in ways where the return on your investments beats every other option available to you. Conventional wisdom will have you think, as well as for the advice of old jaded, salty investors from your favorite real estate investing club, If you don't drive to it, don't buy it.

I mean, how many times have you heard that? I hear that all the time. And every time I hear that, people, I cringe. I cringe at that advice because what do you do if you're like me? If you live so far away from real estate that could produce a sensible income. Now, I live in Southern California and it's extremely difficult to catch. in Southern California, but what do you do if you live in a market like mine? Do you just not invest? Or do you pick up your family and move them to a town that host investment grade real estate so that

you can cash flow? Let me start by saying this. There are really only two ways you can lose money in real estate. Only two, as hard as it is to believe. It's in these two places where most people lose their shirt in real estate. And believe it or not, you can manage these two aspects in your real estate investments and you can virtually eliminate the risk of real estate investing itself. So the first place is bad contractors. I mean, hands down, a bad contractor or a contractor that underbids or a contractor that far exceeds the time. time span of what the rehab should have taken, by far that is one of the first places where you can lose your shirt with real estate investing. And the second place is bad property management.

I could attest that bad property management has by far been one of the reasons Matt and I have ever lost money in real estate investing. You know, there's a saying that talks about, it doesn't matter how great your property is or how beautiful it looks or where it's located. If you do not have a good property management, if you do not have a good property manager on your side, your property, whether it's beautiful or whether it's located in the best market, if your property management is not up to par, you absolutely can lose big time money. just about any and all of the money that you would or could lose in real estate will be directly tied or indirectly to a bad contractor or be a bad property management.

Maybe bad analysis is another, but I'd have to honestly say that is a distant third. But even if you came up with 10 unique and independent places that you can lose money in real estate, proximity to your primary resident doesn't even make the top 10. Distance has nothing to do with whether your investment loses money or makes money. Maybe I could see at the very least a connection to distance and the loser investments if nobody have ever lost money in real estate in their own backyard. But let's be real. We know that is not the case, don't we?

I mean, there's even a show on TV, on reality TV, hosted by Adam Carolla, called to catch a contractor. I mean, people are losing their life savings in their own backyard from just contractors alone. Distance has nothing to do with it. It's easy to lose if your income property is the property next to you or whether it's a property on the other side of the country, if you have a bad contractor. Nothing to do with distance. See, I'm very comfortable investing long distance. But at first, I wasn't. I was just like you. When I started, or when we started, we were investing in Southern California just because that's what the market dictated. So the thought of me investing in the Midwest and in the South was so far-fetched to me, I couldn't wrap my head around it.

It took me years to make that leap, so to speak. But now I am. And it's a question that I get frequently all the time from clients and fellow investors, my friends and family too. I mean, I have friends and family that think I'm absolutely nuts because everything that we own now is in the Midwest and in the South. I mean, I'm sure you have friends and family that think you're crazy, don't you? I think you're a little off your rocker.

Well, I shared with you and Matt has shared with you that we own several portfolios with plenty of rental properties in each of them. And none of them. And I do mean none of them are actually in the state where we live. I do not own, well, let me take that back. I own three properties here in Los Angeles, California, and I owned them by chance. We bought them many years ago. partly because I was a tenant in these properties, but that is the only reason that three properties out of our entire portfolio is here in Los Angeles, California, most of our properties, actually 99.9% of our properties are in the Midwest and in the South. So, you know, in fact, Matt and I have a philosophy, and everybody in our office has inherited this philosophy. And we often say,

we live where we want to live and we invest where it makes sense. I mean, Matt and I are addicted to sunshine and the ocean and we are never leaving California. So we live in California because we're addicted to the sunshine and we're addicted to cash flow. So we do not invest in California. We invest in the Midwest and in the South where it makes sense. Now, I'm not going to try to tell you that it wouldn't be wonderful to. to cash flow in my backyard, but that's not a possibility for us. And you see, once we got over the disadvantages or the perceived disadvantages of investing

long distance, we were then free to discover the millions of advantages that we have from investing with turnkey where it makes sense. So let me share many advantages, and I'll explain a little bit more about the point I'm trying to get across. So when people express concerns to me about investing long distance or when someone says it goes against, you know, they're against long distance investing. What they're really referring to is Mercedes, how are you controlling these properties from a distance? So the topic is not really the distance. The topic is really control. I mean, we're talking about, you know, how are you controlling something in another zip code, let alone another state. So let me break it down for you. And I'll do that by contrasting the controls that I have

versus the controls over a traditional investment. Let's say a 401k or a stock or a bond, or a mutual fund, just to make my point. So when people invest in their 401k, they're ultimately investing in stocks and in companies, usually inside a mutual fund. And for the most part, it's stocks and it's a 401k through their employer. So when they invest in these stocks in mutual funds, some of which surely they've never heard of, they almost never know what the stock is. and they almost never have their headquarters in the city of where they live. I mean, almost all the time, you are literally investing long distance, and particularly if you're investing with your 401k or your mutual fund.

Now, some of you were saying, okay, Mercedes, that is a weak comparison. But because that's not really the control I'm talking about, just thought it would be fun to kind of point it out. The fact is it's whether you are investing with your 401K with your employer or another company, you're already investing long distance. I mean, chances are the headquarters of the company you're investing with is not in your backyard. That's just common sense.

It happens more times than not. But what really matters at the end of the day is the term of control. It's that simple. It's terms of control. So first, what level of understanding do you really have when you're actually investing in a company that makes money for you? The more you understand this, the less mystery there is involved with determining whether you're making a good investment or not. Now, that said, when it comes to how we make money with rental property, I have complete understanding. and so should you of exactly how it's done. I mean, it's pretty simple. We provide a place to live for a hardworking family or a hardworking individual who needs a place to live, who needs to rent a home.

And we, ahead of time, get to know what kind of rents we're going to be collecting and what kind of tenant is going to be paying me my rent, period. It's that simple. That's it. Now, of course, there are details to executing a profitable rental property, but I love how simple the business is at its core. And understanding the process was my first huge mental control. It was the breakthrough that I needed that gave me confidence in investing in real estate at a distance. Now, let's go back to the 401k example, because there's another huge control I have versus a traditional investment that gives me confidence, which is, I call the shots. For example, let's just say that I own stock in Coca-Cola or in Amazon, and they're running a commercial

with a celebrity that I don't really care for. I don't care what they stand for. Can I just pick up the phone and call Coca-Cola or Amazon and say, hey, I don't like that celebrity. Can you change that or we're not going to run that commercial? Absolutely not. Far seriously, however, there's really nothing you can do about that. And what if you're losing money? I mean, can you do anything about that other than just selling the stock, of course? Nope, nothing. Nothing. You either sell the stock, or you wait until something happens and the company decides to make a change. Now, compare this with the controls I have over long-distance investing. Say, for example, I have a question about my tenant or the rents or perhaps the repairs

or possible repairs. Or let's say I have a question about the neighborhood or the kind of neighbors that own the property across the street. I mean, I can simply pick up the phone, call my property manager who will answer all of my questions, and talk to me about anything regarding my property. After all, they're not only managing the property, but they are actually placing my tenants and collecting my rents every single month. I mean, my manager can help me get any and all the information on my property to make any decision. about my property, regardless of his opinion, I have control. And I like that. I like the fact that I can pick up the phone, I can call somebody that can walk to my property and give me their professional

opinion about how my property is doing and where my property stands. I mean, my manager becomes my trusted advisor, if you will, in the same way that like a tennis coach is a trusted advisor. But ultimately, you hold the ball and the tennis racket. So, in fact, the manager himself is a replaceable piece to my puzzle. Because if for whatever reason I needed to replace my property manager, I can. I can hire somebody else. If he increased his rates or if he did something that just wasn't to my liking, I can simply replace my property manager.

And heck, I can even trade out the property itself. If there's a better opportunity, I can sell my property and I can upgrade by another one or perhaps by a multi-unit. I mean, possibilities are infinite once you have control. In the end, I like the balance of being able to ultimately control and to have trusted advisors that can guide me. It's a whole lot like having a great doctor. You know, you're ultimately in charge of what happens to you and unbeknownst to you.

You actually pay your doctor's salary. But you build a relationship with your doctor and there's an established trust and you can control and take on whatever your doctor suggests. And then you somehow relax knowing that you're in good hands with your trusted advisor, your doctor, the advice that he gives you. you and at the end, you know if you're in good hands. It's all the same. Now, this leads me to the biggest aspect of what makes me feel comfortable with investing in real estate at a distance, and that's leveraging myself through the relationships I've been able to build in my local markets.

Now, I'm in 10 markets, and let me just tell you, the only way I have been able to succeed in these 10 markets is because I have taken the time to build our real estate investing teams. You know, I get this all of the time. I get asked, well, why aren't you investing in Dallas, Texas, or why aren't you investing in so-and-so place, or in this small town, it's booming? And it's always the same response. It's because I don't have a team there. I don't know anyone there and without a team overseeing my property, it doesn't matter how great my property is or how great that market is doing. If I don't have a trusted rehabber, a great contractor, an awesome property management team that oversees my property, I'm not going there. That's right. Notice I didn't

say I couldn't find good deals there. I said, I don't have a trusted relationship, a team. The relationships that you build in these markets, where you're investing from a distance, is everything. These relationships are going to make or break your investment. Real estate absolutely holds the power to create financial freedom. But if you can never stop worried about your team that's helping you create this income. that's not freedom. Building relationships comes first. And that takes time and effort. Heck, it's taken me 10 years to do it. And that's why we are so successful at living in California and investing in the Midwest and in the South. Remember, and live where you want to live and invest

where it makes sense. So the great thing about relationship is that you can, could either build them or borrow them. In fact, borrowing relationships is something we do all the time in life. Whether it's, you know, asking your friend for a good mechanic or whether it's asking your girlfriend for, you know, their father's dentist, or if it's using somebody else's successful real estate investment team, if it's working for them, it will likely work for you. Borrowing someone's relationship is like a double benefit for me because now it's two of you in the mix that both stand behind the connection and both of you want the best possible outcome. Remember, at the beginning I mentioned that beyond hurdles we can overcome, there were actually advantages to investing

long distance. So let me wrap things up by telling you what they are. You see, very few people learn how to properly use a team. Very few people will actually let go and learn how to work through other people's eyes and hands and expertise. Let's face it, some of us just are control freaks. I know I was a little bit, but we're control feats and we don't want to let go of that control. But if you can, this is the ultimate leverage. Trust me, it's a light. It's a light. life-changer. Even if you could invest for cash flow in your own backyard, I wouldn't be doing the work myself. I have learned that leveraging as much as possible has benefited me 10 times, 100 times. I still leverage eyes and hands and other people's expertise simply because I know that

their experts in managing properties, for example, much more than I am. And if you can do that, then you can follow the opportunity anywhere and invest where it makes the most sense to you, where you can get the most return, where you can get the most security. And to me, that's control. I mean, that's safety. Otherwise, you have to do what's just nearby. And if it's a bad deal, that just happens to be nearby, the nearby part just doesn't remedy the bad deal part. That's not safety. I mean, that's not control.

Investing long distance allows you to follow the best deals and thus increase your control, certainly maximize growth, maximizing your ROI, it maximizes your monthly cash flow. and truly, it accelerates your journey to financial freedom. I mean, it's literally placed on your doorstep. Leveraging yourself through teams, you will have another final advantage in investing in long distance, which is having very little competition chasing you down to help you build your real estate portfolio.

Most people simply cannot or will not build their portfolio. or tap into a trusted team. So they're limited to their own time, their own skills, their own comfort zones. I mean, these people insist on doing everything themselves, then complain to their friends and family that they get a call during the middle of the night to fix the broken toilet. We've all heard those complaints, right? Unfortunately, this is what people do.

They own a property, but they don't run a business. And at the end of the day, real estate investing is a business. It's your business, your financial freedom business, your life business. And shouldn't you be in control of your life business? Being able to break out of the typical limitations and use other people's teams that ultimately being able to break out of typical limitations and use teams is the ultimate advantage to real estate investing. Trust me, I know how difficult it is to think outside the box, but it has made all the difference in the world for Matt and I. Since it's not possible to invest in a distance without a team, you're automatically forced to not create a job for yourself.

I mean, driving past your property every day without worrying about the hedges, and believe it or not, that could be tempting to do. Instead, you'd be forced from day to day not to simply own a property, but to build your real estate portfolio. Few people actually do this, but those that do build a business that pays them monthly regardless of the location. And that, takes a team. Understand, and please let this sink in. My job today is to manage teams, not manage properties, and this is why I'm free. It's the quickest access to financial freedom people. Investing long distance has forced me to really get into the habit of managing teams, not properties. From day one and hundreds of deals later, here I am. I manage teams.

So whether you leverage my cash flow savvy team or somebody else's team that is proven to be successful, just take the time to build your own. It's through you managing these teams where your financial freedom exists. And it doesn't matter where the property. It's that simple. Ladies and gentlemen, my name is Mercedes-Torres, and I will catch you on the next episode of Turnkey Saturday. Your portfolio has seen better days. But this two shall pass.

And the best for you is yet to come. Together, we'll get you there faster. We're cash flow savvy. And we'd like to share some information with you that will show you how you can take control of your financial future and accelerate its arrival. Go to cashflowsavvy.com. More building, less waiting.

Cashflow savvy.com. This podcast is a part of the C-suite radio network. For more top business podcasts, visit c-sweetradio.com.