Epic Real Estate Investing - Something New That's Working Right Now | 922

Episode Date: February 8, 2020

Inventory is creeping a little bit, properties are selling not quite as fast, and overall there is a market slow down, nationally. Therefore, Matt decided to share the old yet new strategy that will help you acquire cash flowing properties in this transformative period. Moreover, it will boost your ROI through the roof! Tune in and find out more! Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terrio Media. Success in real estate has nothing to do with shiny objects. It has everything to do with mastering the basics. The three pillars of real estate investing. Attract, convert, exit. Matt Terrio has been helping real estate investors do just that for more than a decade now. If you want to make money in real estate, keep listening. If you want it faster, visit R-E-I-Aase.com.

Here's Matt. All righty, hello, and welcome to the epic real estate investing show. It's the weekend. Hope you having a good Saturday. And I just want to jump on here real quickly today to share with you something new, something brand new that's working for me. It's actually not brand new. It's something I used to do quite a while ago.

But when the market shifted, it wasn't nearly as effective. But as I'm noticing nationally, inventory is creeping up a little bit. properties are selling not quite as fast. Still some really hot markets. Still a lot of activity going on. But seeing some slowdown and moving into a little bit more of a normal market, although I still think it is a seller's market. But I thought I'd give something a try that used to work really well for me to see if it's not too early for it. And it turns out that it's not. I've just moved to Las Vegas. I've been here about six months now. born and raised in Los Angeles my entire life.

And I've done a lot of investing outside of L.A. In fact, almost all of it. We flipped a bunch of short sales early on and made great money in Los Angeles. I think Los Angeles is a great flip market. There's a lot of money to be made if you can find the right opportunities. But it is really a terrible cash flowing market, particularly if you're looking exclusively at single family residences. You get some fourplexes, and you can start getting some into some cash flowing opportunities.

But multifamilings, I mean, there's such a high demand for it, and the cap rates are so low. That's just really tough in California, Southern California, Los Angeles area to cash flow. And me being a cash flowing investor, I was always kind of sad that, you know, I had to leverage other people's efforts and experience and leverage teams in other markets so I could actually become a cash flow investor. and, you know, just build up that whole residual income portfolio for myself. And I just always wanted to get back in the streets and do it, but I just didn't want to flip anymore. And so when I moved to Vegas, I got really kind of excited. I mean, we moved here because of the zero state tax.

That was the biggest reason. The second reason, which I didn't realize was going to be as big of an impact as it is, but a lot less people, a lot less traffic. So I've really enjoyed that part of Vegas. much more than I anticipated because, I mean, something's five miles away. I know it's going to be five minutes to get there. That wasn't the case in Los Angeles. That was a 20 to 30 minute drive if it was five miles away.

Most of the day, like there wasn't even a rush hour. Here they got rush hour, of course, but most of the day, it's smooth sailing. Anyway, when I got here, the third thing I was really kind of excited about was, wow, I get to get back in the streets. I get to get back and hitting the pavement and sitting belly to belly with sellers and doing deals. And so when I got here, I started to analyze the market because property values are at least half for comparable properties here in Vegas. And so I was like, okay, we got a better opportunity to cash flow. And as I did my analysis, the rents are a lot lower too, though.

So the distance between the purchase price and what the property would rent for still kind of far apart to lend itself to a really good cash flowing market. But certainly a lot more possibility here than there was in Los Angeles. So I started to tinker around a little bit and do some stuff. And one of the things that I used to do, and I actually had a real estate investor approach me to do this for them before I was actually the investor executing a strategy. And anyway, this real estate investor had come to me and said, hey, this is what I want to do. I want to start making offers on properties that have been on the market longer than 90 days. And I want to present cash flowing type offers.

And that was a long time ago where it wasn't so impossible to cash flow in Los Angeles. But he had a very unique structure for it, where he had offer a percentage down, a down payment. And then his payments would be half. of whatever the rent was, whatever the projected rent would be. So he gave no regard to interest rate. He gave no regard to what they could get elsewhere. It was just, this is the deal that works for me, and you've been on the market for a while,

and, you know, if it works for you, let's do it. So we're going to create a win-win scenario here. So I just remember that. And so we used to do that a lot with three plexes and four plexes in Los Angeles. Mercedes and I did, but we haven't done it in a while because of the market. Right?

It's become such a seller's market and the inventory has been so low in most markets that there was no real opportunity or need for a seller to accept our offer. They didn't have to wait that long. So now that we're seeing this kind of, that's a transformation in the market. I'm not going to say it's a shifting market. I'm not going to say it's about to blow up or the bubble's about to burst. Although we've been on a really good run for quite a while that something is probably going to happen at some point. here pretty soon, maybe a year or two at the, I would be thinking. But I like that. I want it to shift because a lot of the creative strategies that put me to where I am today, they work much

better in that type of market. All right. So let me get to the point. This is what I've been doing. I've been looking for properties on the multiple listing service here in Las Vegas that are owned free and clear, and they've been on the market for longer than 90 days, which is a long time in this market. If you're on the market for 90 days, something's up with your property. Either your price is too high or something fundamentally wrong with the property, something. Something's going on. So I, through a real estate agent, I have been submitting these creative offers.

Okay. So we've been submitting 20% down and half of whatever the rent. is 100 payments of whatever half the rent is and then full balance due on the 101st payment, which I think gives me what seven or eight years of interest or excuse me, principle only payments. So it's taken me a while to find a real estate agent to work with, to do this with. Because, I mean, it's been almost as difficult to find a real estate agent as it has been to find motivated sellers that will work with me in this capacity because most people are going to say no. I mean, I already know this.

most of them are going to say no, just like with all of our marketing, right? I just need a real estate agent that gets that and understands that. And so I had moved here, I had a friend that actually had a license here, and I introduced him or shared with him what I wanted to do that. We're going to make a lot of money together. And he was like, okay, yeah, let's do it. And when it came down to the moment of truth, he bailed. He talked to his broker and said they didn't feel comfortable submitting that type of offer,

which I thought was ridiculous. I mean the type of offer? I'm offering to purchase the property just with terms. That's all. Like there's nothing shady going on here. But for one reason or other, they decided that it wasn't going to work for them. I was like, fine, I'll go find somebody else. So I found somebody on Craigslist that was selling seller finance properties, hit them up.

And they were entertaining the idea. We went and met and I met at their office. And she submitted about 20 of these offers for me. And they didn't get accepted. Like I told her, they wouldn't get accepted. Right? I told you this up front that they weren't going to get accepted. And so you came back and said, hey, they didn't get accepted.

I don't want to do this anymore. It's like, well, you could have told me that up front because I gave you what was going to happen up front. And so I've been going around through different real estate agents and finally found a good one. Someone that was actually contacted me off of Craigslist and real hustler. And I said, this is what I want to do. And they said, cool, let's do it. So we've been submitting these offers. And there's a key to this.

I'll give you the key in a second. Anyway, in the last four or five months, we've gotten four of these offers accepted. And what this is doing, like, it's pretty amazing. And if you're thinking about what do you get the 20% down, I'll go ahead and figure that out for you because it's really a no-brainer. But I've got four of these accepted, and I want to get 20 by the end of the year. That's my goal. I want to get 20 of these by the end of the year. So I've put some cash down, and I've got principal-only payments.

those payments are half of what the rent is. So I'm receiving rent on these properties and paying it down. So I'm cash flowing because my payments are half the rent. So I'm cash flowing. But I'm also getting 100% pay down with the principle of every payment that I make. So the ROI, the return on investment, is through the roof. So my payments on all four of these, I don't know, we'll just keep the math simple, are right around $1,000 each.

So what that means is I'm cash flowing about $300, $400 a month after. after I factored in all the expenses that go into running a property, about four or five hundred bucks a month, but my net worth is growing at $4,000 a month. So I'm making about $400,500, let me clarify, four to $500 per property. So I've got cash flow coming in for about $2,000, but my net worth is growing by $4,000 a month because of the principal paydown. So I'm cash flowing and building wealth. So it's something I'm really excited about, and I'm kind of hoping that the market settles a little bit because it's going to work even better. All right.

So if you want to duplicate this, if you want to do this, if you're in a area where typically across the nation, when a property hits, the market value hits about $150,000, so that's a big part of the Midwest and the South. Once it goes past that, it starts to get kind of difficult for those properties to cash flow. Just because the rent doesn't keep up with the value of the property. So my market, I'm looking at houses that are like 250 to 3.3. which are far greater than, it's far greater price than where that whole cash flowing system breaks down.

So I'm looking for about $300,000 properties. I'm offering 20%. So I'm offering 60 grand down. And these $300,000 properties are renting between $1,000 and $2,000 a month. So far from cash flowing. They don't even come closer to meeting the 1% rule. But I'm still making them cash flow with this offer. So that's the structure.

So I'm offering the first offer that I'm submitting. It's 20% down. And then I figure out what if the market rent is for that house, I offer 100 payments of whatever that is. So if it rents for $2,000, I'm offering 100 payments of $1,000, full balance due on the 101st payment. That's the first offer. So that's just the blanket offer that we're given to everybody.

So I am incentivizing my agent. I am giving my agent $20 per counter offer that we receive, $20 per counter offer that we receive, $20 per counteroffer that we. receive and I'm giving them 500 bucks for every offer that gets accepted, whether I close or not. And so why would I do this? Well, because I'm making a lot of money doing it. All I want, so for my agent, and you might have to go through a few agents to do this with you, but your agent has to kind of, see, it's agent talking to agent.

It's not me personally submitting the offer to the agent or the seller. It's agent talking to agent. And agent talking to agent have a very different conversation than buyer talking to seller. So I had to coach up the agent a little bit. And like I said, this is probably why it took me a while to find a good one. But I had to coach up the agent a little bit so they got to do a little bit of selling. Right. So they call up their fellow real estate agent that's representing the property and say,

hey, I saw you've got this property. I've got a buyer for it. It's not a ideal offer. I'm sure you're looking for something different. But it is a full price offer. and I see that you've had this property on the market for a while. And so I'm going to send this over. It involves some seller financing and some terms.

But it is full price. It is a real offer and it will close. So the whole point of that salesmanship is if you were just to send this straight over, your agent was to send it over an agent just like in an email like most agents do. It probably get rejected. It probably wouldn't even get looked at because most agents have never seen anything like this before. So you've got to kind of prep them a little bit. You've got to say, hey, you got this property.

It's been on the market for a while. We're in a really hot market right now. You can sell that up a little bit. That, you know, this is a seller's market, and you've got this property for like 90 days. This has got to be a pain in the butt. Well, here's what I got. I've got an offer. It's a full price offer.

And it's not what you're looking for, probably. But it is a real offer, and it will close. So why don't you say, I'm going to send it over and go ahead and present it to the seller and get back to me. and, you know, if they want to counter, we're certainly open to that, but here's the offer. All right, so they left the door open for the counter and everything. So that's what the agent has to do.

And he's had to do this a lot, right? I think we've, they're like almost 200 properties that fit this description. So these properties, and I think I might have skipped this one element of this whole thing. They've been on the multiple listing service for more than 90 days, and they're owned free and clear. Okay, so there was a lot of those here.

There's like almost 350 of those that fit that criteria. So I think we submitted like 250 of those offers, and we've got four accepted. So that's what you need. So if you're in a market that it's difficult to cash flow, and you could probably play because play in a different area of the market than everybody else is playing, and just by executing this one little strategy or implementing this strategy. But you need properties that have been on the market for longer than 90 days. You need properties that are owned free and clear or high equity.

would probably work as well, and then you need an agent that's willing to play this game with you, that's willing to work the numbers for you. Right? And so I compensate them because I know it's going to be a lot of work. I know they're going to get a lot of knows.

They might even get laughed at or ridiculed by their fellow agents. So I'm taking all that into account, so I want to make sure that they're compensated for it. So this is what has happened. We've gotten four of these deals, and only one of them ended up being a principal-only deal.

Okay, only one of them ended up being a principal-only deal. The other three came back with counter-offers with interest rates, like between four, five, six percent of what the seller was willing to carry back. And so I got, I didn't accept their counter. I countered back with one percent interest for three years. And then I upped their percentage by one point, whatever they offered. If they counted back with a four percent interest,

I counterback with 1% for the first three years. And if they counter back at 4%, then I'll give you 5% for years, 4 through 8 is what we're offering. So if this fits your market, then it might be something you want to try. Okay? But understand, it's just like all the other lead generation strategies. You're going to have to work the numbers. And you're going to need a real estate agent, a licensee that's willing to work those numbers with you.

Now, let's talk about the down payment, right? So I'm offering 20%. And I'm probably going to start adjusting my, now that I'm getting these accepted, I'm getting counteroffers, I'm probably going to start pulling that back down to 15% and then 20% or excuse me back down it and then down to 10%.

Because, you know, if I'm getting a lot of these accepted, then I'm probably paying too much for them, even though they're smoking, smoke and smoking deal. So I'm not too concerned about that right now. But if you are, this is what you need to look at. If you need to borrow, say, 50 grand, right, for your down payment, because you just got one of these accepted, and you are going to cash flow three, 400 bucks a month, and you've got $1,000 a month in principal paydown, so your net worth is growing by $1,000. At 50 grand, let's see, 50,000 times, say if you paid 8%, right? 8% to somebody, you know, just be aggressive.

give somebody 50%, excuse me, 10%, so 50,000 times 1, divided by 12. So that's 400 bucks a month. Okay, so that kind of kills your cash flow in that scenario. You could pay for that, but your net worth is growing by $1,000 a month. It's at least good enough terms for you to take down the property, so you control it, run some principal pay down for a little while, and then go do a traditional refinance. out of it. And then you can pay the person back and now you've got control because a big part of leverage is not only maximizing your ROI, it's your ability to get control of things that you

wouldn't be able to otherwise getting the, or having the ability to get control of real estate and experiencing all the benefits of full ownership without you having to come in with all the money to do it. So just kind of look at all of that. I mean, everyone's situation is going to be a little bit different. But to me, that's a smoking opportunity, and I will take those, I'll take 10 a week. I will go find the money for that. There's no shortage of people out there that are willing to take 10% return, 8% return on small amounts like that that are secured by real estate that have smoking terms in place. All righty. So just letting you know what I'm doing over here and what's working. And I think it's going to work even better as the market continues to evolve.

and through its normal cycles that we all expect and that we've all seen historically. But consider that. So let's sum it up. Here's what you need. You need access to these properties. And what I've been using is prop stream. You can get access to all of this MLS data,

whether you have a license or not. If you go to prop stream epic, prop stream epic.com, you can get a seven-day free trial and you can pull down some lists and some names and give it a shot right away. All righty before you even have to pay anything. So go to propstreamepic.com. I arrange for you to get a seven-day free trial there.

So you can pull down some names and start this. So you need that. You need the data. Second thing you need is an agent that's willing to cooperate and do the work with you. Now, that is, sounds relatively easy to do, but it's not. Real estate agents, they're up in their own head. They work within a small little box, and it's really tough for them to see outside of that. So you've got to find someone that's willing to do the work. I mean, just think about the person that passed this up, right? My friend, even, that we're here, and decided I didn't want to submit one offer. And he hasn't been a real estate agent for very long, but having been a real estate agent myself, I know what for sales in a couple months for a brand new real estate agent would

mean to his income, what it would mean to his boss, what it would mean to his reputation and his, you know, and just his ego inside of the office, not to mention his bank account, right? So, but you got to find someone that can actually see that. He didn't see it and neither did the next few and it took me a minute before I found one. So you need that. So you need the data and then you need the agent. Then once you got the agent, you got to coach the agent up a little bit. All right? You got to coach the agent up a little bit and let them know they can't just fire this off passively through email. They've got to call, pick up the phone and call the agent and explain the situation and sell this opportunity. Now still, be prepared. You're going to

again, mostly knows. Most of them. And let the agent know that. Set their expectations appropriately as well. But we're only looking for the ones that accept. And for cash flowing properties in a growing market, like the one, like Las Vegas, that have either principal only or 1% loans on them and that are cash flowing, it's worth it. It's worth all of the rejection.

Do you know what that's going to do? If I hit my goal, and I will. I'm going to get 20 of these by the end of the month, excuse me, by the end of the year. That means every single month my net worth grows by an extra 20 grand. $1,000 of principal paydown per property times 20, $20,000 a month, not counting the cash flow, not counting the tax benefits,

not counting all that fun stuff that goes along with real estate. So just consider that. Then, once you get the offer accepted, you can compensate them for their counteroffers and getting offers accepted if you want. chose to do that because I wanted to keep them motivated, particularly I ran into a few unmotivated agents up front. So that's why I offered that. And then once you get the offer accepted, now you can go look for the money. If you get one of these offers accepted,

it's a smoking ROI. If you can't find the money for that deal, then you need to expand your network because there's no shortage of money in the system for a deal like that for such small little amounts of money. Alrighty? So take that with what, however you want. I'm just letting you know what I'm doing right now and what is working for me

and I see it only working better as we move into the future. So, yeah, now you know. Now you got to do what you know. All righty. So that's it for today. God bless to your success. I'm Matt Terrio.

Live in the Dream. Take care. We got the cash flow You didn't know Homeboy We got the cash flow This podcast Is a part of the

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