Epic Real Estate Investing - Real Estate Motivation (for a crashing housing market) | 1203

Episode Date: May 17, 2022

Real estate business got you down? Motivated sellers seemingly disappeared? Been a while since you closed your last deal? Maybe still looking for the first one? Interest rates causing your buyers to hesitate? Fear of a recession got you second-guessing if you’re even in the right business? These questions are circulating… people don’t know what’s next for real estate, not to mention the economy as a whole. Uncertainty sucks, but Matt has good news for you, as he shares 7 crucial points that will give you hope and trust in the future of real estate investing! BUT BEFORE THAT, have you asked yourself why the majority of people are creating their wealth in real estate investing? Curious, how do they do that? Tune in and find it out!   Let’s go! Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terio Media. How to create wealth investing in real estate. It seems everybody's doing it these days, right? And you want your piece too? Well, I like your style. So let's dive in and I'll show you how. You ready? Let's go. Welcome to the all-new, epic real estate investing show.

The longest running real estate investing podcast on the interwebs. Your source for housing market updates, creative investing strategies, and everything else you need to retire early. Some audio may be pulled from our weekly videos and may require visual support. To get the full premium experience, check out Epic Real Estate's YouTube channel, EpicR-E-I.TV. If you want to make money in real estate, sit tight and stay tuned. If you want to go far, share this with a friend. If you want to go fast, go to rei-Aase.com.

Here's Matt. By the time we're done here, you'll know why real estate builds wealth more consistently than other asset classes, your options for getting started, and you'll also have a step-by-step process to take it down your first deal. Oh, and by the way, if you're ready to take that first deal down right now and you just want to cut to the chase, I put together a free training just for you to help you get that first one done. And then I'll show you how to earn $5,000 a month,

flipping contracts and properties working as little as just one hour a week, and you can access it at matsfreetraining.com. All right, so with some patience and time, real estate investing can yield significant wealth and passive income. But it won't take nearly the type of patience and time that the stock market or traditional retirement accounts require. Having said that, the longer you hold your properties, the wealthier you will become. It's pretty remarkable what can happen in a portfolio of just 10 years. Typically, it will far exceed what the average person does executing a traditional retirement plan

over 40 years. Creating wealth in real estate is possible. And when done right, it's probable. So let's start with why that's so. Well, the first thing is, leverage. And this is really where it begins, using someone else's money to buy your investments. Not only is the money readily available, but the terms are much better compared to most other kinds of loans available to the same person for other types of purchases. Interest rates are currently hovering right around 5%. Down payments can be 20% or less, and loans are routinely amortized over 30-year periods. I mean, what else can you invest in using financing with terms like that. So when done correctly, you can often buy real estate and prove its value, then refinance it

to recover 100% or more of your money using something called the Burr strategy. That's buy, rehab, rent, refinance, and repeat. And when you do it that way, you create an infinite return on your money. Leverage is such a critical part of real estate investing that we often take it for granted. Now, there is risk to leverage, and that is when you borrow money that costs you more than the property pays you. So don't do that. The second thing is appreciation. And this is what most people think of when investing in real estate. And you can tell this is what they're thinking about because they'll ask questions like,

how's the market? Or is this a good time to get in? You know, only appreciation-minded investors will ask questions like that. And that's most people. Then the answers to those questions are always the same. The market is great. And this is a wonderful time to get in. And that's because as it stands right now and we'll stand this way for the long, foreseeable future,

we've got more people than houses. the demand far exceeds the supply. And when you have that in business, regardless of the product or service, prices can only go one direction, and that is up. Appreciation is where the majority of wealth is built in real estate, and it's primarily because when you use leverage, your appreciation is multiplied by a factor of five. Third thing is cash flow. You know, cash flow, it's the money that you have left over from the rent that you've collected after all property expenses have been paid. And most real estate has expenses such as the mortgage payment, property taxes, insurance, maintenance, and property management fees. And when you buy a property that pulls in more rent each month than the expenses that you carry to own it, your cash flow is positive.

That leftover money each month goes right into your pocket. And it's this part of real estate, the cash flow that enables people to quit their nine to fives and live off of passive income. It's how they escape the rat race and retire early. Next, there's depreciation. Now, even though it doesn't sound great after talking about appreciation, I mean, I get it. The name can be deceiving. But depreciation is not the value of your real estate dropping. It is actually a tax deduction the IRS code grants you for the normal annual wear and tear

on your properties. And this significantly reduces the tax burden on the money that you do make, giving you another reason as to how real estate builds wealth. Next is amortization. And this is rarely discussed. It's extremely underrated. And it happens to be my favorite thing of business. investment-grade real estate. You see, when you take out a loan to buy real estate,

you got to pay it back, right? And if we're talking about the home that you live in, it's you that's making those payments. But if we're talking about an income property, it's your tenant that gives you the money each month to make that payment. And traditionally, after 30 years, you own the property free and clear. And you didn't even buy it. Your tenant bought it for you. That's why it's my favorite thing about real estate. Next, forced equity. Now, this almost sounds illegal, doesn't it? I assure you it's not. Forced equity is a term used to refer to the wealth that is created when an investor does work to a property to make it worth more. Unlike appreciation where you are at the mercy of the market and factors that you can't

control, forced equity allows investors to make improvements to property that increase their value, thereby forcing equity. The most common form of forced equity is to buy a damage, or out-of-date property and fix it up by adding new appliances, new flooring, cabinets, countertops, or even adding square footage. When it comes to multifamily properties, you can force equity by simply cutting some of the building's costs, like the trash service, like gardening, pool cleaning, or you can force equity by raising rents. You know, even raising rents, just $25 per unit per month can have an exponential impact

on a property's value, or by adding vending machines or storage facilities. or laundry machines. Anything that will cut the building's expenses and increase the building's income will force equity on the property. And then there's this, what has always been a factor, but not as big of a factor as it is right now in the last 40 years, and that's inflation. Inflation is the silent and invisible wealth thief. It's the hidden tax that we all pay for rampant government action. And as non-real estate owners watch their buying power shrink during times of inflation, real investors watch their buying power grow. You know, in today's time of runaway inflation,

it's really quite extraordinary why more people aren't taking the steps necessary to own as much real estate as they can. You know, gold was once considered to be an inflation hedge until it was proven in 2001 to be so easily manipulated in the market. So really, our strongest weapon against inflation is real estate. And here's how. In real estate, your biggest expenses like the mortgage and the property taxes, they're fixed for the time that you own your property.

And during that same time, your property is appreciating in value and the rent you collect is rising. Because of inflation, a real estate investor's expenses decrease while their income increases. And if we expect inflation to continue, doesn't it make sense to get on the right side of it by investing in assets that benefit from inflation? All right. So now that you're in the know of how real estate creates wealth, let's run through through five different ways for you to get involved. The first way is you can buy income properties. And there are a few ways that you can do this. You can simply just call a real estate agent and go shopping,

or you can purchase directly from an owner. You negotiate the sales price, you close the deal, you make the necessary repairs, if any, and then you start marketing for tenants to live in your property. Now, if that's too much for you to do personally, it's become pretty popular to contact a turnkey service who will do all of that work for you. Cashflow savvy is a company that makes this process super easy,

and you can download their free information, at cashflowsabby.com, and then decide on how you'd like to proceed. Number two, you can fix and flip homes. If you like to get your hands dirty, you may consider fixing and flipping them. You know, you'll need to find undervalued properties, and when you find those, you fix them up, and then you sell it for more than what you paid for it. Pretty simple concept.

You buy low, you add value, and then you sell high. And whether you choose to buy income properties or fix and flip them, you're going to need access to capital. And if you're short on capital, you may opt for number three, and that's wholesaling. This is where you find a below market deal, enter into a written agreement with the seller via a purchase contract. Now, before you close that contract, before you close that deal,

you find another buyer that wants the property. And instead of selling that buyer the property, what you'll do is you'll actually sell them your place in the contract. And for a fee, they step into your shoes and they close the deal, while you take your fee and then you move on to find the next deal. The fourth way is investing, in REITs. These are real estate investment trusts. So if you're not ready or don't have the desire to invest in physical real estate, you can invest in a real estate investment trust. This is a good

option for beginners or people just looking to passively increase their exposure to real estate, as you can invest with little money and you don't have any property responsibilities. It's very much like buying shares of stock, but instead you're buying shares of the REIT that owns a property or properties. Most of the time, you're going to get paid in dividends, based on the income generated by the properties held by the RE. And the fifth option that you've got is real estate crowdfunding. You've likely seen crowdfunding sites by now. They pull a group of investors money together to invest in a large project, in this case, real estate.

And just like investing in physical real estate, though, this also can be risky. So do your research before investing in crowdfunding. Know who the money is going to, and you want to know their track record and building and maintaining and managing investment properties. So, those are five options and where you could start. Now, how do you take down that first deal? Well, I broke it down into five simple steps. First thing, save some money. Real estate can present some of the most expensive barriers to entry of any of the asset

classes. But there's something called an FHA loan that requires just a 3% down payment to purchase a home. In most parts of the country, that would amount to $20,000 or less, much less in some places. And that's a really good first stepping stone into real estate. And if that still seems out of reach, consider finding something. to partner with. You know, 50% of something is better than 100% of nothing. Two, choose a strategy. You know, each of the strategies that I mentioned previously can produce great success. So if you choose to buy REITs or funds, you can do some online research about your

options to help you get started. If you want to buy physical property, I can help you with that for free at matsfreetraining.com. Third thing, assemble a team. You may want to work with an agent when you get started. The really good agents will send you off-market opportunities that haven't been listed yet. Eventually, you could need someone to fix and manage your properties and an accountant to handle the financials. I mean, I wish I would have hired a bookkeeper much sooner than I did. It's such an easy and affordable thing to do, but if you wait too long, it can become very difficult and expensive to implement. Believe me, I know. Now, the fourth thing is you want to go shopping. First, decide what you're looking for and what you're going to do with it when you find it.

I mean, are you going to hold it or are you going to flip it? If you choose to hold, how much money do you want to make per month in cash flow. And if you're going to flip it, how much profit do you want to make when you do? Knowing the answers to these basic questions makes the shopping process much easier. Because you don't want to be a buyer of real estate. You want to be a shopper. The best investors are. So know what you're looking for up front.

Number five, close the deal. The final step is just pulling the trigger. Negotiate your deal, write the offer, and close it. Now, that first deal, it's going to be the hardest, but it gets easier really fast. In fact, once you have your first. deal under your belt, you're going to look back scratching your head and wondering why you waited so long to get it done. Thanks for sitting tight while we pay our light bill. We'll be back right after this.

Hit pause on whatever you're listening to and hit play on your next adventure. This fall get double points on every qualified stay. Life's the trip. Make the most of it at Best Western. Visit bestwestern.com for complete terms and conditions. Ever hear someone say, I have too much money? Me neither. Let's get you some more. Back to the show. Real estate business got you down. Motivated sellers seemingly disappeared. Been a while since you closed your last deal. Maybe still looking for the first one. Interest rates causing your buyers to hesitate. Fear of a recession got you

second-guessy if you're even in the light business. You know, these questions, they are circulating. People don't know what's next for real estate, not to mention the economy as a whole. The amount of social media noise and fake news circulating, that doesn't help either. I mean, we're living in a time of great uncertainty. And that's all we really want, right? We want to know what's going to happen next so we can plan and act accordingly. Well, I've got some great news. Seven specific things about real estate investing you can be certain about. Plus a simple three-step action plan on how to crush this next cycle. And I'll let you in on a very specific date that will change everything. About three years ago, my assistant and I, we were taking a look at my YouTube

analytics and noticed that the number one way people found me on Google was when they typed in the words real estate motivation. And we both thought that that was weird considering I'm not a motivational speaker, nor have I ever made a video on such a topic. But the Google and YouTube algorithms, they apparently thought differently. So as an experiment, we created this quick six-minute video, real estate motivational speech, just to see what would happen if we were intentional about motivating. And sure enough, more than 20,000 people found that video actively searching for something like it. It was just a quick, fun, and easy thing to do because you don't have to try too hard to unpack everything that's good about real estate, how it's created more wealth for more people than anything else,

and really how it's set up to be the best investment and or business that you could get involved in over the next 10 years, at least. There aren't many things that you can say that about with such certainty, and that should be motivating enough to stay your course. But wait, there's much more. Three years ago, we were all dealing with a different challenge where motivation was necessary just to make it through. And today, we're dealing with new stuff,

where a good motivational speech could serve very useful to. Because there's a lot of stuff out there right now that's got us all down, like the war in Ukraine, record inflation, rising interest rates, gas prices, the stock market, and we're hearing about this threat of a potential food shortage and something that I've never seen in my lifetime, not to the degree that we're seeing it right now. We've got two political parties more concerned with dominating each other

than they are with the welfare of the American people. It's enough to make you want to just go crawl into a corner and wait until it all passes. But whatever you do, don't do that. Say it to yourself, don't do that, because uncertainty can cause you to do just that. You're a human being. I get it. Everyone's feeling an extraordinary amount of uncertainty, not to mention fatigue, as we seemingly are getting hit with one thing after another with little time to catch our breath in between.

It's a tough place right now for a lot of people. People are exhausted by the events of the last 24 months or so and just aren't sure what's going to happen next. But there are some certainty. Like number one, Americans' second biggest mistake is that they take advice from people that lack the knowledge to give said advice. So number two, this is Americans' first biggest mistake is that they've pursued only a single source of income, of which translates to a single point of failure. That's a huge vulnerability during times of such uncertainty. Number three, inflation was last reported at eight and a half percent. But we know it's more than that. But let's say it is eight and a half percent. If your investments, assets, your cash aren't earning at least eight and a half percent return,

you're getting poorer every day. You literally can't afford to sit. sit still and wait for this to blow over. And many people understand this because number four, I can tell you that when the economy pulls back, people go back to school to learn new skills or improve on the ones that they already have. This always happens. It's smart to sharpen the sword for potentially tough times ahead. And it's happening again right now. As you can see this report from just last week. Trade schools see student boom for offering careers within grasp, low attendance cost, strong skilled worker demand credited for up to 40% new student growth at trade schools. Then number five, real estate is a basic human need, right along with food, oxygen, and water.

The demand for real estate will never go away. So that brings me to number six. We currently have more people, the demand already walking the earth than we have housing, making building, flipping, rehabbing, and landlording the ultimate job security for the foreseeable future. The number seven, and I can tell you this with a great deal of certainty, that in 24 months time, it will be June, 2024. And that reality for most people feels like it's so far out. It's seemingly not even worth thinking about right now because of what we're dealing with in the present.

Now, something else I can tell you with some certainty is that at some point, and I don't know when this is, I don't know if it's going to be six months, nine months, 12 months, 18 months, maybe longer, but at some point, we will pass a line. It's a line that I call the survival line. And interestingly enough, for those that get past the survival line, the other side of this line often presents an opportunity to thrive. There's a cleaning out that occurs, and a part of that cleaning out is because some real estate investors will be on a red line downwards.

They will freeze in terms of zero response. This is the panic line. There are certainly some investors that will be decimated by what's going on. And if that is you, all I can really say is I'm thinking about you. And please reach out because it doesn't have to be that way. But there is going to be some fallout from this. And some real estate investors are going to end up on this red line. They might not make it to the survival line.

And I don't want that to be you. Other real estate investors will find themselves on this orange line going through the middle here. A lot of up and down, up and down between now and the other side. And they will cross the survival line. and they will make it to the 24-month mark, but they'll be two years down the road and likely in exactly the same situation that they're in right now,

or maybe even a little bit worse. And so you lose these two years. This is what I call the fiddle line. This is the line where people go into defensive mode and they hunker down, just as our leaders are asking us to do again. Again, can you believe it? I mean, I think prepare for a food shortage,

that's the thing of the day. And these real estate investors might poke their head up every now and then to test some things, but then they hunker right back down if they don't see an immediate result. For the most part, they're back out there stocking up for imminent doom again. I mean, I just witnessed it yesterday at Target. It's happening. But this time it's not toilet paper. Seems to be baby formula for now.

And then they'll hunker down and continue praying and hoping for the best, just trying to ride this thing out, stay low. And then there are real estate investors. that can recognize that there is a green line running through this too. This is the line for those real estate investors that are positioning for prosperity. Most of these real estate investors, however, will cross this line when motivation and ambition overtakes fear. And the people on this green line recognize that. And as we cross the survival line, a few things will happen.

There's going to be a rush to the market because people have pulled back on their marketing a bit, adopting a wait and see approach right now. right now. But they're recognizing that they've seen this movie before and they know how it ends. And right now, they're reloading and they're getting ready to launch in a really big way. There's going to be a rush for deals because the eviction and the foreclosure moratoriums, those have all expired and people are thinking about this already. There will be a rush for buyers in private money. There'll be a rush to expand to other markets.

There will be massive opportunity in all of these areas. and your results will all depend on how you are set up during this foundation period here. You can't just make it up as you cross the survival line. The thing is, as we look at this right now, as we look at these three lines right now, they look relatively the same, don't they? They look essentially identical. And the only difference is what is going on in the minds of these real estate investors right here. Are you frozen with fear and panic?

Are you hunkering down, fiddling around, and trying to ride this thing out? Or are you going to fight and push through and position yourself for the emerging market opportunities? And even as we cross this six to 12-month mark, these lines still might look relatively the same to most people, but the people on the green line will have been positioned dramatically differently when we cross.

And that difference starts back here. The choices are made back here today. So mark this date. It's on. The strategic time frame right now is three months. Right now over a 12-week period. What do you do? And whatever you're doing is it setting you up for the red line, the orange line, or to build a foundation on the green line. So here's the action plan. If you start right now, there'll be plenty for everybody. All right, so number one, get clear on where you want to end up. You see, whether you like it or not, the gap between the halves and the have-nots, it's going to widen some more when this thing is all set and done. We have no control over that, but we do have control over where you choose to end up.

What side of this growing chasm do you want to land on? Number two, get educated on how to take advantage of the opportunities in a shifting market. As the same strategies that have worked the last several years as the market has been appreciating, as it still is even right now at this very moment, those will be the same strategies, though, that you want to deploy as the market shifts into the other direction. Control will be the name of the game. And creative financing and acquisition will be the tactics. So arm yourself with creative financing terms and deal structures.

You want to understand this and you want to get good at it. I put together a long list of 21 creative financing terms and 10 deal structure templates for my students. They're cheat sheets, if you will. And if you like a copy, you can download them for free at epic breakthrough.com. Number three, start marketing. Now, a huge portion of real estate investors. Those that are freezing headed down that red line and those fiddling on that orange line, they've pulled back on their marketing, if not stopped altogether.

The space right now has cleared out significantly. It always does in times of uncertainty. So start marketing now and be ahead of the game when we cross that survival line and everybody rushes back to start marketing. And that wraps up the epic show. If you found this episode valuable, who else do you know that might too? There's a really good chance you know someone else who would. And when their name comes to mind, please share it with them

and ask them to click the subscribe button when they get here and I'll take great care of them. God loves you and so do I. Health, peace, blessings, and success to you. I'm Matt Terrio. Living the dream. Yeah, yeah, we got the cash flow. You didn't know, home boy, we got the cash flow.

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