Epic Real Estate Investing - Market is Shifting...What I Should Do to Protect Myself | 750

Episode Date: August 20, 2019

Mercedes Torres shares her experience of 2007 real estate collapse and what lesson she learned back then. Furthermore, find out what Mercedes does to protect herself from the potential recession and what is the key point that saved here from the last market crash. 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 Tuesday on the epic real estate investing show for Turnkey Tuesdays with your host, Mercedes-Torres. Hello, hello, and welcome, welcome to Turnkey Tuesdays. My name is Mercedes-Torres, and I am privileged enough to be partners and Prime with Mr. Matt Terrio, the guy who created the epic real estate empire. So for those of you

tuning in again, welcome back, my friends. And for our new Turnkey Tuesdays listener, this show was created to cater to busy professionals who understand the importance of real estate, but either don't have the time or the desire to learn every single little nuance there is about real estate investing. or you're just flat out stuck where you are in your investment career and need a little picker-up or a little push over the hill to continue to invest in your portfolio. So whatever the case may be, so glad you made it and welcome. You know, I also often share, you know, one of the reasons I created Turnkey Tuesdays was because I wanted it to be food for thought for you. It's really important to me that you get to think about your financial situation, your financial freedom and really your financial future.

Are you comfortable with your life at the moment, financially that is? Are you spending the time with the people in your life that you absolutely want to? Are you working the hours that you want to work? And are you loving what you do for a living? And one of the reasons I created this show is because I feel that real estate investing, specifically passive income, can afford that financial freedom to most individuals to allow them to do all the things that possibly aren't happening because you're grinding nine to five. And some people grind more than nine to five.

I speak to some people that work 10, 12, 14 hours a day, and they're missing out on their lives. So this is one of the many reasons that I do turnkey Tuesdays so that I can get your wheels spinning. And like I like to say, it's food for thought. And I bring this up, my friends, because it's no secret. The market is shifting. All economic indicators are pointing to perhaps a risk. recession. Now, Matt and I always say we don't have crystal balls. We are not financial analyst. We don't study the financial matrix of, you know, the Wall Street Journal and just what's

happening out there. But one thing that I do know is that history repeats itself and the writing is on the wall. Feds have just recently cut their rates and banks are being more conservative with lending. I mean, even large companies are starting to see a shift in available credit as it's dropping for them. Is there going to be a recession this coming year? Well, the reality is no one knows. None of us have a crystal balls, but as I do say, history repeats itself. And here's what I do know. I was, I don't know if I should say fortunate enough or unfortunate enough, but I was a part of the 2006-2007 real estate collapse. Ironically, I was in the real estate business and I was really in the banking industry, in the financial future, or in the financial aspect of real estate.

So I was working for mortgage banking. I was working with subprime loans, Negam loans. I was working for the bank. And I saw the writing on the wall. And I feel like it was overnight. But the reality was that collapse, it didn't happen overnight. I mean, I literally saw rates rising. then all of a sudden plunge, and then credit lines diminishing.

I saw at the time a first mortgage and a second mortgage was really, really common. And I saw second mortgages disappear. And there used to be a product called Rapid Refie, where you can do a refinance by just showing the history for 12 months, perfect history of payment, and you can do a cash out refinance. and that instantly went away. And luckily, at the time, while I was still working at the bank, I was fixing and flipping homes in the Los Angeles area. Luckily, I was a really small fish in that market.

And eventually, I ended up growing myself to about 24 flips a year. By that time, I was only working part-time at the bank and working full-time plus on my real estate business. And at the time, it was fixing and flipping in L.A. So I did about 24 fix and flips and one year. And doing the math, it was about two flips every month. And luckily, when the market changed, I only had two deals I was working on, thankfully. Now, the average profit for me on those fix and flips, they ranged between about 60,000.

to $85,000 per deal. And that was at the height of the market. In 2007, on my very last flip, that literally was on the market for a total of 63 days, because at the time, I couldn't keep a deal on the market for more than a week. That last deal, I made $8,936. from a $60,000 profit, I made $8,936. I will never forget it. I will never forget that figure. And what saved me was that I was smart enough to have bought a few rentals along the way that were cash flowing. And even when the market shifted, no matter what the market did, those rentals still cash flow.

for me. And they paid my living expenses. I shared, I've worked with the bank, and while I didn't have insider information, because, you know, we just didn't. I was a bank employee. I saw the behavior of the bank. I even saw the behavior of the executives. And on a national level, that made me think twice about what I was doing. So I knew that there was going to be an end game to this fixing and flipping madness that was happening. Now, luckily, I didn't lose money in real estate, but I can't tell you how many of my friends and colleagues lost everything. Now, I can't slay. I blame them because they were thinking big and honestly, I think big. But the difference between myself and some of my friends and colleagues is I was always looking at clues. It was always kind of trying to analyze what the market

trends were doing. And I don't suffer from analysis paralysis by any stretch of the imagination. But as I often say, market trends, they repeat themselves. And history repeats himself. And so I tread wisely, as I like to say, because I do look at the writing on the wall. And I prefer to be wrong about the writing on the wall on a conservative basis. Now, I say that with a grain of salt, because when I do say I think big, I do think big. If something is working, I will continue to make it work and I will try to maximize that. Now, I say it every week, my friends. I am not a financial advisor. I don't advise my friends and family on real estate. I simply share what works and what doesn't work.

And I speak personally. I have made money in real estate, but my friends, I have lost money in real estate. And what has saved me is I keep doing the things that work over and over and over again. And by far, it's been almost 15 years. And cash flow on rental properties, my friends, it still works. buying them right and having a team on the ground that collects my rent works every single month. And this is why I preach about passive income. This is why I preach about buying rental properties.

So what I want to share with you is what has worked for me in hopes that it prepares you for our next upcoming shift in our market. Now, I don't think the real estate market is going to collapse, so to speak, but I do strongly think, and I see that the market is shifting, and it will certainly make a difference in our country, and at the end of the day, to our pockets. So here's what I can share with you so that you can prepare yourself for the shift. Now, this is what I do to protect myself. Number one, save for a rainy day. Now, I always have a cash reserve that I have saved for a rainy day. And ideally, it's six months of savings, so to speak, six months of living expenses, six months of savings.

I want to tend to bump that up a little more. If I can duplicate that, so to 12 months or even half of that. So let's just say I duplicate that to nine months. That is money that I will, will be able to use in case there is a massive crash. Okay? Number two, this is huge. Stop buying toys. Stop buying dumb stuff, as Robert Yosaki calls it doodads. Don't go out and buy a brand new car.

Stop buying ladies, the Louis Vuitton purses and the Jimmy Choo shoes. Honestly, we don't need that. we have probably plenty and more than what we need to have. So stop buying those extra things that you don't really need. And number three, pay off high interest credit cards. That high interest eats you every single month. And I'm a big fan of carrying smart debt, but I'm not a fan of carrying dumb consumer debt.

So smart debt would be interest rates on a mortgage for a property that is producing cash flow. That I don't mind caring. And if you bought it right, then your tenant is actually paying that mortgage payment, that interest payment. However, if you bought a Louis Vuitton purse, a shopping spree, or a television, and you're paying interest, that's what you need to pay. because that is money out of your pocket that you need to eliminate from your life. Okay. Now, here's what I do to be proactive. And this is hopefully going to be really helpful for you so that you can dive into

real estate that's going to pay you. Refinance equity in your home to allow yourself to still cash flow on an investment perhaps or even on your own home, you wouldn't cash flow. But if it's an investment property, refinance the equity, still have it cash flow and invest the money that you pull out into another investment property. That's key, my friends. Number two, talk to people, connect network. At the end of the day, my friends, the connections will bring you opportunities.

And opportunities mean that you can pick up. up deals with oftentimes no money down that allow you to cash flow. Could be a seller financing deal. Could be a deal that you take over from someone that has to sell due to a crisis in their lives. And those deals come to you because you know someone. And that someone knows that you have money stashed away for a rainy day. Number three, buy properties that cash flow. Really important, my friends. While I'm a fan of savings,

you can only save so much before it doesn't make financial sense for you. So what I suggest is that money that you're saving for a rainy day still have your rainy day money. But if you save enough, you can buy a property that will in turn pay you. So if there is a recession, they, your tenants, are still going to be paying you rent that will in turn produce cash flow for you. Number four, leverage the market data in your real estate negotiations. When you're buying that property, it's important that you align yourself with the seller. So understand what the seller is looking to achieve. As far as you're looking to achieve to buy a deal. So if you understand the seller and you understand what the market is doing, you can use it to your

advantage. A market's shifting and the value is dropping. Inventory is becoming readily available. If you get your buyer to understand what the market is doing, I bet you they'll be more prone to sell. Number five, and I say this every single week, my friends, be crystal clear on your goals and know your numbers. Understand what kind of cash flow you need in your world. Now, some people just say, you know, I want one property a year. Other people tell me, I want $10,000 a month in passive income. Whatever that number is, be clear. because when you have a goal and something you can focus on, we now can measure what it's going to take to get us there.

Really important, my friends. Don't be fearful. A fearful mind does nothing. And don't wait until the market adjust itself. As Mark Twain has said or would say, don't wait to buy real estate, buy real estate and wait. And if you're buying real estate, I mean, it scares you. I know. But especially when the market is shifting, think about the simple facts that make me feel better every single time. I jump into an investment properties because my friends, even with my portfolio, I still think about the investment on a personal level when I buy it.

But here's the one thing that makes me sleep comfortably at night. Regardless of a recession, even if there's a market collapse in real estate, that is, people are still going to need a place to live, even if the market shifts. So let's assume that people lose their homes and they're obligated to pay rent in a rental property. why would they not want to rent your property? And if you buy it right and your property is a good rental property, even in a recession, you could still cash flow. At the very least, even if you had to drop your rents because the market collapsed so bad,

it's likely that you are going to have a tenant and at the very worst possible scenario, you can break even at the end of the month. But still, at the end of the year, when it comes to tax time, I guarantee that you will make money at the end of the year if you bought the property right. This is why it's really important, my friend, that you aligned yourself with a team on the ground that not only understands the market, but that understands the demand, of the rental market. Because if you buy in a market that has demand, when the market is normal, think of what that market is going to do if there is a shift.

I often say real estate is one of the best investments out there, specifically passive income. And this is why. Because even if the market is to shift or it's to collapse, the only thing that saved me, in 2007 when the market collapsed can save you too. And that's passive income and cash flow. I would love to hear from you, my friends, and if you want to share your story with me, or if you feel stuck,

or if you just need a little push, don't hesitate to reach out to me, my friends. Feel free to send me an email at mercedes at epic real estate.com. I do respond to each and every one of my emails. Sometimes I respond at a day. Sometimes it takes me a week. But if you do reach out to me, I will get back to you. And also, my friends, for those of you that have gone to our website and have seen that the website is currently down, we are revamping our website to provide more important, up-to-date information for you to escape the rat race and create financial freedom in your life. That website should be up in a couple weeks. So just wanted to throw that out. there because I have gotten your emails to tell me that the website was down. So thank you very much. Again, my friends, if you want to reach out to me, my email address is Mercedes, just like the car, at epic real estate.com. Love to hear from you. And until next week, my friends, this is it for

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