Epic Real Estate Investing - Recession Rebellion: How to Fight Back & Master Seller Financing! | 1276

Episode Date: August 24, 2023

In this powerhouse episode of the Epic Real Estate Investing Podcast, we're diving deep into the strategies, techniques, and mindset you need to not only survive but thrive in the throes of a recession. The recession is a word that strikes fear into the hearts of many, but with the right tools, it doesn't have to. We're breaking down the barriers and delivering actionable insights to help you navigate the turbulent waters of the current economic downturn. Learn how to make informed decisions, maximize opportunities, and come out on top, even when the market seems against you. But that's not all! We're also taking you on a journey into the exciting world of seller financing. Discover how to structure unbeatable deals with zero payments. Seller financing isn't just a buzzword; it's a powerful tool to acquire properties without breaking the bank. We'll show you the ins and outs of seller financing, from the initial handshake to closing the deal, all without a single payment. Whether you're a seasoned investor or just getting started, join us for a thrilling episode that will revolutionize your approach to recession survival and seller financing mastery. P.S. Whenever you're ready to go deeper and further with your real estate investing, looking into my partner program to help you get your first deal might be the move... take the first step here for free 👉 https://epicearnwhileyoulearn.com/ Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terrio Media. Ladies and gentlemen, real estate rock stars and financial freedom fighters everywhere. Get ready for the ultimate doubleheader showdown on the epic real estate investing podcast. Segment one, housing market update, the recession is back. Bam, just when you thought the economy was safe, the recession rears its ugly head and it's back with a vengeance. Want to know how to duck, dodge, and dominate the housing market during this financial frenzy? This will arm you with the tips, tricks, and techniques to come out on top. Don't let the recession knock you out.

Fight back with the intelligence that only epic real estate investing can provide. Segment two, how to structure seller financing with zero payments? Piao! You want to punch above your weight in real estate? This is your golden glove. Discover how to structure seller financing like a champion, making deals with zero payments. Yes, you heard right, zero. Learn the tactics that will make sellers tap out and hand over. those keys with terms that'll have you dancing in your money ring. Don't miss these rounds of

real estate rumble. Subscribe to the epic real estate investing podcast now and get ready for a financial fight night that will leave your bank account heavyweight and your mind boggled. Ring the bell and let the wealth wars begin. It's going to be epic. Hey, strap in. It's time for the epic real estate investing show. We'll be your guides as we navigate the housing market, the landscape of creative financing strategies and everything you need to swap that office chair for a beach chair. If you're looking for some one-on-one help, meet us at rei-i-a's dot com. Let's go, let's go, let's go, let's go, let's go, let's go, let's go. Let's go. Hey, the recession is not canceled. I mean, this chart right here says there's a 100% chance,

a massive recession is coming. But Bernard Bamul of the Economic Outlook Group sent out a research on June 29th, declaring, Ladies and gentlemen, the recession has been canceled. But what about this chart? It says something very different with 100% certainty, proving that Bernard, Market Watch, Bloomberg, and even the constantly negative news network are 100% wrong.

So we've got facts and we've got opinions. I'm going to show you both sides so you know exactly what to do next. You ready? Let's go. I got an email from my friend Mike Dillard. and Mike Dillard this week, and it sent me down a rabbit hole, a deep one. And here's what I learned. And what you deserve to know as a consumer and as a real estate investor, especially if you're concerned about how the housing market will react to a recession. Now, I don't know if you've

been watching, but the stock market, it's been on its way up. It's climbing higher and higher and higher closer to its highest point ever. Now, nobody predicted a full recovery by this time in the stock market, let alone toying with an all-time high. Well, imagine that we've got this super-cool crystal ball. It can't predict the lottery numbers. Bummer, I know, but it's never been wrong about predicting the stock market's future. What would you give for a crystal ball like this? To be able to predict the stock market? No need to answer, because I'm going to give it to you for free. You see, that crystal ball actually isn't imaginary. It exists. It's this chart right here showing something what's called yield inversion. Oh, God, what's a yield inversion? If only someone could just explain that to us like we

were five. Hey there, kiddos. Captain Cashew here. Yield inversion, huh? All right, well, it's like this. Let's say you got a buddy. And he asks you to lend him $10 for a year. He promises he's going to give you back $11. Well, that extra $1, that's your reward for waiting. It's called interest or yield. Now, you've got another friend, and he wants to borrow the same $10, but for two years. So if he also gives you back $11, that's not right, is it? I mean, you'd expect a bigger reward, say $12 more for waiting a year longer. This idea is the foundation of treasury bonds. You see, when your government needs to borrow some money to pay for important things like building schools, fixing roads, or helping people, they create something called a treasury bond. It's like an IOU. And people,

like your parents, can buy these IOUs trusting that they'll get a little extra thank you for letting the government use their money. And that little extra is called interest or yield, just like when your buddy gave you $11 for borrowing 10. Understand? Normally, a 10-year U.S. Treasury bond, like lending your buddy money for two years, should give you more money back than a two-year bond, like lending your buddy money for just one year. But when the opposite happens, when the two-year bond gives you a bigger return than the 10-year bond, that's when we have this thing called a yield inversion. This unusual switcheroo is an early warning sign. Like your mom, when telling you to tidy your room up because grandma is visiting for the summer.

It's trying to tell us a recession is on its way too for a summer visit. It's actually not trying to tell us. It is telling us with 100% certainty that a recession is coming to visit. If the chart is wrong, it will be the first time it ever has been. As you can see here, every time the blue line drops below the horizontal black line, we have a yield inversion. And as you can see, they party together in a wild roller coaster ride. And we call this ride the economy.

When the blue line starts climbing back up toward the black line, we're in for a major economic slump, like a recession, or God forbid, a depression. These not-so-fun times are marked by the gray vertical lines that you see. This exact sequence happened six times out of six since 1980. And as you can see here, the blue line is below the black line right now. but it won't stay down there forever. At some point, likely within the next few months, it's going to start shimmying back up to cross the black line again.

And if this was a game of chance, we'd be looking at a 100% chance of a big, bad economic crash. So when? The experts, they're having a tough time answering that question. Ambrose Evans-Pritchard, world economy editor of The Daily Telegraph, who has covered world politics and economics for 30 years, says the global recession has been postponed, not canceled.

But then he's currently pondering the question, have we averted a hard landing or simply delayed the inevitable? Dick and Hyatt at Investopedia agrees that the recession keeps getting postponed, but he follows it up with it may never come. Looking it like this, imagine you're back in grade school, waiting for the school bell to ring, but it didn't ring when it was supposed to. So you think, hey, I'm just going to keep playing dodgeball until it does. That's kind of what's happening right now with the economy.

People have been waiting and waiting for the recession bell to ring, and we're still waiting. There's a bunch of smart people who study this stuff, and they've got all these fancy tools like charts and graphs to predict when a recession might happen. But lately, these tools are acting like your little brother who swore he saw a monster in the closet. But when you go to check, no monster in the closet. Are these economic tools crying wolf like your little brother? Although all signs are pointing to a recession, the experts are starting to think this time is different. Or they're patting themselves on the back right now saying, we've figured out how to stop recessions. But this is why it might be different.

We've got this shining ray of hope called the job market. Currently, we've got the lowest unemployment rate since 1969. That was 54 years ago. Low unemployment and recessions, though, they don't coincide. As you can see here, just prior to each recession, dating back to 1948 when we started tracking this number, there's a noticeable uptick in unemployment just prior to entering a recession. Right now, you'd have to go back almost 80 years to find the unemployment rate lower than it is right now. And it's still trending downward right now. So despite

everything, workers are in high demand. This is typically what we see after a recession, not before a recession. So maybe this time is different. Know this, though. Like that game of dodgeball, the tables can turn in an instant. So what do we do? Well, first, stocks should continue to rally for a bit, but watch your greed. Yet, there's no need to panic sell either. The second, stashing some cash. That's time-honored advice during times of uncertainty like this, so you might want to do that. Third, take on a side hustle or a second job to earn more money to stash away. Fourth, play conservatively, but play, because we could see a market crash and we don't want to get caught with our pants down.

Yet we could dodge the market crash, dodge the recession altogether, and find out that we missed a real opportunity. Real estate, it is your conservative play. And there are two big reasons for this. First reason is all about the housing market and recessions. Historically, there's no correlation. Most people think that there is because the most recent major recession

and housing crash of 2008, they happened at the same time. Previously, though, as you can see here, those gray vertical lines that mark recessions, housing markets were flat. Or they actually rose during the dot-com recession of 2001 and the COVID recession of 2022. And if we go back, they also rose in the recession of 1990, 1981, 1980, and 1973. So that's number one. Recessions and the housing market crashes are not related.

And if they were, a strong case, according to this chart, could be made for the housing market to more likely appreciate during a recession, then crash. Reason two, and this is where it is different. In 2008's housing market crash, there was a fundamental imbalance of supply and demand. We were overbuilt and didn't have enough people of home buying age to buy all the houses that had been built. When you have too much supply like this, that's when you get a bubble that eventually pops. Thus, you had 2008. Now, fast forward to today, and that supply and demand seesaw is tilted in the opposite direction. With the dead. decades worth of building deficit and the peak age of our population,

passing through the average first-time homebuyer age, we have a fundamental imbalance of supply and demand again. But this time, we are underbuilt. And this is not a precondition for a bubble popping. I mean, if anything, we've got a people bubble, not a housing one. This article on Builder Online just released, it makes three compelling points for a strong housing market. First point, the article makes.

The median existing home price is up 23.4% from last year to a whopping $363,300. And that's no fluke either. It's a 112-month streak of year-over-year gains. The second point it makes, the average days on market last month was just 17 days, and 89% of all the homes sold in less than a month. And the third point it makes, the unsold housing inventory is sitting at a measly 2.6-month supply, almost half of what it was pre-COVID. So less supply with more demand, that equals higher prices.

It's economics 101. So what's the takeaway here? Well, with properties flying off the shelves, inventory, doing the limbo, and prices on a marathon run, it's not reckless to conclude that the real estate market isn't just stable, it's thriving. For all the doomsday profits predicting a crash with their clickbait headlines, you might want to hold on your hats because this rocket, it ain't coming down any. time soon. Sure, all the negative nancies will eventually be right, but not anytime soon. Now, let's say you disagree with me because you have your own information that has you believing

a crash. It's just right around the corner. Well, if it happens, you want to align your investments with where people will be spending their money during an economic slowdown. And I'm talking about their basic needs. That's where they're going to spend their money on food and energy and shelter. Yeah, shelter, housing. If you're going to park your money anywhere, long. term. The demographics and economics are in your favor for investing in real estate. Certainly more in your favor than anything else available to the average person without insider information, of course, that another story for another time. But in the meantime, keep it simple. We have more people than housing. People need housing. So invest in housing, long term, for income and equity building. For the next 10 to

15 years, it's as safe as a bet as investing in water and air. Listen, all we have are education, guesses and maybe a few fingers crossed. Whether preparing for the storm to hit or finding ourselves in the eye of the storm, it's not the time to run and hide, but rather to gear up and play smart. The game's only over when you stop playing. We'll be back with more right after this. Boarding for flight 246 to Toronto is delayed 50 minutes. Oh, what? Sounds like Ojo time. Play Ojo? Great idea. Feel the fun with all the late slots in live casino games and with no wagering requirements. What you win is yours to keep groovy. Hey, I won!

Boarding will begin when passenger Fisher is done celebrating. 19 plus Ontario only. Please play responsibly. Concerned by your gambling or that if someone close to you, call 186653310 or visitcomex Ontario.ca. Matt Terrio investor, tell us where the deals are. Today's deal is in Birmingham, Alabama. And tell us what the numbers are. Are you feeling shackled by the hustle and bustle of the urban grind? Ladies and gentlemen, your escape hatch has been flung wide open,

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grab a free investor package from cashflow savvy.com because savvy isn't just a word, it's who you become. Ever hear someone say, I have too much money? Me neither. Let's get you some more. Back to the show. Hey, this house right here. It's now mine, and I used OPM.

That's other people's money to buy it, and I've got no payments on it either. But how? I changed one small thing, and the no payments method was born. Listen to up. If you're serious about investing in real estate, you need to know about what's possible when it comes to seller financing. Working with banks, it takes too long. The rules are strict. You need a job.

You need a credit score. you need money, and it's just so much harder than it has to be. You've got faster and easier option. For example, I'll show you how I structured this seller finance deal right here with zero payments. Sick. I hate, yeah. What's up? It's Matt at Epic. And if you're new here, glad you found me. If not, great to see you again. Let's waste no time. This creative financing technique, seller financing, requires no credit check, no appraisal, and no expensive lending fees either. And I'll guide you through one, how I introduce sell. seller financing to a seller so that they're more receptive to it.

And two, how I structure the paperwork. And three, I'll walk you through step by step what I just did to get this deal seller financed with zero payments. And stay tuned until the end and I'll give you a copy of the terms that I use most of the time, the clauses for my contract, and some nice deal structured templates to help you get started to. All right, seller financing, it's my secret sauce. But it wasn't always.

Initially, I didn't know what it was. and then when I learned what it was, I still didn't know how to do it. And then I had all these other fears in my head of all the worst case scenarios, the legalities and the legal jargon, and then mostly the fear of a seller laughing me out of the room for just suggesting it, because I just couldn't wrap my brain around why a seller would give me financing. But fast forward, I've got easy fixes for all of these now, and I'll address them all for you. Before I walk you through the how, let's quickly answer the what. Seller financing, it's a of real estate agreement that allows the buyer to pay the seller in installments over time

rather than using a traditional mortgage from a bank. Seller financing is like a bank loan, except that it just cuts the bank out of the loan and allows the seller to own, oversee, and benefit from the debt. Now, you may be thinking, Matt, didn't you just say you bought this property without having to make payments? I mean, how does that work? Well, good question. And I'm going to show you how it work. And know that you can do it too, as long as you have these three things working for you. The first thing that you need is an understanding of the relationship between price and terms. The second thing is you need a motivated seller. And three, you need a good presentation. So I'm going to cover all three of those. First, the price in terms of a real estate sale, it works like this.

This is the deal dynamics axis. The vertical line represents the price that I pay, and the horizontal line represents how or how long I take to pay the price. If the seller wants their money now, like ASAP, controlling the time of when they get their money, I take control of how much money they're going to get. So fast cash for the seller means low price for me, right here on the axis. Cellar says, no way, Jose, I need a higher price. Then I need a longer time to pay the price. That's the exchange, the relationship between price and terms.

It's a give and take thing. And as long as you're taking control of one or the other, the price or the terms, you've got yourself a deal. For example, on this property, the seller wanted full price. way up here. So, no problem. I'm going to take control of how and how long I'm going to take to pay the seller's price. And that's the beauty of creative financing because how I pay the seller's price has an unlimited number of possibilities, as you can see here. These are just some of my options, by the way, and when you start combining them, the sky is the limit. It's by combining them that you

accidentally create something called the no payment method. Now, I've done something like this before. most of the time I do this in one of two ways by deferring, that's a postponement of an action or an event, like deferring interest or profit or in this case payments. Typically, interest doesn't accrue during a deferral. The second way is via a moratorium, which is an authorized period of delay in the performance of a legal obligation or the payment of a debt. Interest generally does accrue during a moratorium period. But there's now for me this third way that I want to tell you about that's so much better, especially if you like cash flow. So here's the deal.

I pulled a highly targeted list from deal engineer in St. Louis of vacant houses with a probate lien and delinquent tax activity, and then I cut the size of the list in half using their AI predictive analytics, their artificial intelligence, to just 50 houses of a small list, and then I put them in my seller-sniper campaign. Now, there's this lady, Cora, a widowed retiree in her mid-60s. She was struggling to sell her rental property. We've got a symptom of a motivated seller. We need that for this to work, right?

Cora had initially hoped to sell her property for top dollar like all sellers do, but after a few months, realized that the house's condition, it was driving buyers away. They were passing on it. She didn't want to deal with or pay for a full-scale renovation, though. It was becoming now a financial burden for her, but a mental one more so because she had just sold her home and was leasing it back temporarily from the new owner while she tried to sell this rental property. Cora had the plan to sell her to St. Louis properties in order to downsize to a smaller,

more manageable place closer to her daughter in Texas. And this is when she called me. But because of the condition of the property, I couldn't give her the price that she wanted. She was at $174,000, and I was more like $85,000. The property needed serious work to get it to its full market value of $200,000. And once it was clear that she wasn't budging from her price, I had said like I always do when this happens, reluctantly, of course. And this is the good presentation needed. It's so simple a fifth grader could understand it. It's like this. I said, Cora, you know the market may allow me to get closer to your price if you're willing to take some money now and the rest later. How much do you need right now? You see, I just asked her for

seller financing without saying seller financing or using any other industry or legal jargon. You know, if I confuse them, I lose them. So I keep it super simple. So Cora and I, we went back and forth a bit and she said, I need at least $75,000. So I was like, eesh, because that's like more than 40% down. I was like, well, okay, that's much more than I normally put down. But if I could get that for you, could I break up the balance into 300 equal monthly payments? See, that would have been like 330 bucks a month and the market rent for the house is $1,400. So that's a pretty strong cash flow. But because she wants so much money down, it's just a hair over an $8,000. percent cash on cash return, which it doesn't suck, but it's not great. She did some quick

figuring, and she was like, I'll be bed before you pay that on. And that's definitely not the first time that I've ever heard that. And so I asked, how many payments would be acceptable? And she came back with 100 payments, which takes me up to $990 per month payable to her. And that pushes the cash flow and ROI into negative territory. So that's a no-go for me. I said, Cora, I like the house, and I could put some money down, but probably not more. more than 10%. So at $174,000, that would be $17,400. And she wasn't cool with that. She needed that $75,000 to bridge the gap between what she sold her house for and what she's buying the new one in Texas for. So here's what I proposed. Cora, I can't give you more than 10% down

because I need my cash for other deals. But let's say that I agreed to the monthly payments of $990. And I went and borrowed the money for that to pay you the first five years. in advance. That would give you $59,400 in upfront payments plus the $17,400 down payment for a total of $76,800 of clothes. And then after five years, I'll send you $990 every month until paid in full. And that way we can both get what we want. But in order for me to get that loan, my lender would need to be in first position. Would you be open to that? Now, she didn't really know what that meant, so I had to explain it to her. And I explained it like this. When a bank loans, most... money to someone to buy a house. And we'll use this one as an example at $174,000. That loan,

let's say it's 80% would be $139,200. That gets recorded against the property as a security to the bank. Now, if the borrower fails to make their payments, the bank can foreclose and sell the property, usually at auction, to get their money back. That's how banks are protected. And you are protected in the exact same way. But when there are two loans on a property, whichever loan is recorded first against the property is considered to be in first position, which has a higher level of protection in the event of a default. It's like this. If there were a second loan used for the difference, 34,800, that loan would be in second

position because it was recorded at a later date and time. That's how the positioning is determined. And the positioning is really important because it determines the loan's priority in terms of repayment and their rights against the property. And here's how that works. If the property were to go up for sale at a foreclosure auction because the borrower stopped paying and it was to only sell for, say, $150,000, the first position loan gets paid first and whatever is left over, $10,800 will go to the loan in the second position, which in this scenario isn't

enough to cover the second loan. So the second position lender loses $24,000 in this example because they had a lower priority. Being in second position, it's riskier. And she understood that. Being in second position, it can be a real disadvantage under normal circumstances, but not necessarily when you're in second position to yourself. So I drew out what it would look like in our deal. I'm buying the property from Cora for $174,000. My lender will give me $76,800 to give to Cora, and he'll be recorded in first position. Cora will then carry back a second loan for me of 97,200. That'll be recorded in second position, where I'll also give that money to Cora. You see, Cora is the beneficiary of all the money in first position and second position. She's in second position to herself. So if the property

drops below the market value or the loan amount, it's not a total loss, likely not a loss at all. Cora can take the property back, keep all the money that she had received since the time of the sale, including the upgrades that I had made to the house, and then she'd have the opportunity to sell it all over again, making a boat. load of money. Now, yes, it would be an inconvenience for her maybe. That would be like the worst case scenario, but it would be a huge windfall for her at best. Being in second position is definitely a risky place to be when it comes to a loan other than yours. But when you're in second position to yourself, not so much. And the relief, it was palpable in her voice when she agreed to move

forward. For her, it wasn't just about the money, not too much about the money at all at this point. It was about having the freedom to move on to the next chapter of her life. So with Creative financing, this new no-payments method, I managed to turn a roadblock into a win-win for both parties. So this is how it was written on the contract. Purchase price, $174,000. Terms of purchase, buyer to pay seller $17,400 as a down payment. Seller agrees to carry back the balance of financing for the buyer at $990 per month until paid in full. Buyer agrees to pay the first 60 payments in advance, $59,400 do a closing. Just like that. that simple, nothing fancy. So here we've got no banks involved, no credit check, no appraisal,

no expensive lending fees, and no payments to the seller for five years. And now I do have a $396 payment to the lender that I borrowed the down payment from, but it's not $990, which allows me to comfortably cash flow $444 per month for the next five years. annually, that's $5,328 of passive income. And now what's my cash on cash return? Because it ain't 8% anymore. Oh, and as promised, I've got these for you. They're a copy of the, the terms that I use most of the time, the clauses that I use for my contracts, and then some deal structure templates to help you get started too. And to make it easy, I uploaded them all to the link that you can find in the description, or you can just go to epic breakthrough.com. 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 for us. 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.