Epic Real Estate Investing - The Rocket Fuel You Need to Accelerate Your Financial Freedom Journey - Epic Wealth Wednesday | 296

Episode Date: September 20, 2017

What do you do after shifting your mindset towards streams of income?  If you have committed to real estate as the path, then Epic Real Estate Investing has the solution. Learn to virtually eliminate investment risk when you leverage relationships, know-how, and cash flow to grow your passive income portfolio. Your wealth creation will get a major boost when you activate these risk management strategies. It’s time to experience Epic Wealth. ______   The free course is new and improved!  To access to the two fastest and easiest strategies to a paycheck in real estate, go to FreeRealEstateInvestingCourse.com or text “FreeCourse” to 55678. What interests you most? • E.ducation • P.roperties • I.ncome • C.oaching Learn more about your ad choices. Visit megaphone.fm/adchoices

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It's what you know for sure. That just ain't sold. You don't have a money problem. You have an idea problem. Welcome to the final frontier. where the average person has a legitimate shot at creating Epic Wells. Your host, Matt Terrio.

Hello, and welcome to the Creating Epic Wealth Show, the revolutionary new money show disguised as a real estate show. As real estate, it's the final frontier where the average person has a legitimate shot at creating epic wealth. You really just don't have a chance at any sort of financial front. unless you incorporate real estate into your financial plan. And if you just don't have the time to do it, nor the desire to take on all of that heavy lifting, then this is just the show for you.

So, last week, you made two important decisions. You decided to shift your focus and efforts from building piles of money to creating streams of money, and you decided to use real estate as your passive income vehicle. Great decisions, by the way. So as you start putting action behind these decisions, you're reading and learning about real estate investments, you're hunting for properties, you're analyzing deals, you've liquidated some of your underperforming assets, you've now got the capital to pick up that first investment property. So you start negotiating and you start closing deals and you're renovating and you're repairing properties, you're building your team, you're hiring property managers, contractors, and other support staff. And after a few months of front loading all that work, you rent the property. and bam, the hard work pays off.

You get your first rental deposit. Chiching or not. See, after a few weeks, this is what happens. You get a call from a tenant. They've lost their job. They need some time to make up the rent. The following week, they call about the water damage that has happened due to the leaky pipe under the sink.

So you dispatch your handyman. He needs to call a specialist to dry the place out. Then the handyman sends you a bill. larger than you expected, of course. You then do the math and realize, oh my goodness, it's going to take an entire year of rent to cover that bill. It's going to take a year of no more mishaps, God willing, just to get back to even.

When all you really want, you just want a responsible tenant and a quality property that pays the rent on time, but instead you're wondering, what have I gotten myself into? You see, if you get this part wrong, that's pretty much what happens. Tenants have endless excuses as to why their rent's going to be late. Properties break down. Contractors overcharge.

And in your interest to move forward financially, you realize you're actually moving backwards. But when you get this part right, you find responsible tenants that pay their rent on time every month. You find low maintenance properties and you work with competent licensed contractors that care for your business as much as they do their own. And your dreams of passive income start to become a reality. You know, as I mentioned previously, the key to getting passive income and overall wealth creation to materialize is leverage. leverage leverage is the rocket fuel that's going to make your journey to financial freedom not only exponentially faster but significantly easier now when most people hear the word leverage the first thing that they think of is the leveraging of someone else's money you know in most instances a mortgage via a

bank the typical scenario is you invest 20% of your own money and the bank provides the rest 80% And there's a five to one ratio of other people's money to your money. And I'll show you how this rocket, how this works. And it's how rocket fuels or boost your wealth creation, how it is rocket fuel for your wealth creation. And I'll use my client Jerry's investment from a few years ago in Birmingham, Alabama. He paid $126,000 for a really nice three-bed, two-bath property, $126,000 in. He put 20% down. The bank brought in the rest.

And since his purchase, the property has appreciated 19,000. percent Birmingham's a booming market over the last few years and it's appreciated 19 percent and is now valued right at 150 grand giving him a gain of 24 thousand dollars in equity he gained 24 thousand dollars in equity and Jerry put 20 percent down on that property right so Jerry put down 25,000 he earned 24,000 of equity producing a 95 percent return the property appreciated 19 percent but Jerry's investment appreciated 95 percent That's how leverage works. There's your rocket fuel.

And I'll share with you how this fuel boost your real estate investments in ways it can't with your other investment options. So, for example, after hours of research, I found an article in the Wall Street Journal dated back September 30th, 1996. And it's comparing the average annual rate of return of stocks versus other investments.

And there are, you know, countless other articles and studies out there that you could refer to. But I chose this particular one because it represents the longest period of time that I could find of any other study. So it's from 1926 to 1992. The study spans 66 years. And you can see, if you could see what I'm seeing right now, but you can't. But the headline reads, Dow Industrials have been a wise investment decision. Dow Industrials have been a wise investment decision. And in the article, it slanted toward leading the reader to believe that had they just invested in the Dow industrials, the small stocks of the Dow Industrials and just kind of left their money there, over that period, they would have received an average annual rate of return of 12.5%. 12.5% more than any other option in the article.

The chart actually shows a respectable 11.1% for real estate. So we got 12.5% for the small stocks, 11.1% for real estate, 5.2 for, 4%. for intermediate term bonds and 3.7% for Treasury bills. So what the study doesn't show though is that most people when investing in real estate use leverage. The average person doesn't have access to leverage for the other investment options, but for real estate they do. The bank is not going to loan you money to buy a stock.

No, even if Bill Gates gave you a personal guarantee on that Microsoft stock, the bank would still not make that loan. but they'll do it every day on real estate. And given the typical 5 to 1 ratio we just talked about, real estate's returns in that article jump up to 55%, absolutely crushing the Dow industrials. And that doesn't include the passive income received while holding the real estate, which is really incalculable,

but indeed significant. And what's more, the tax deductions that accompany real estate of which are not available with stocks, or treasury bills, increase your profit margin even further by mitigating your biggest expense in life, taxes. This is how the leverage of money serves as rocket fuel for your real estate investing. Well, that's all fine and dandy, but what about the time required to find, fund, fix, and manage the deal, right?

Glad you asked. That's where the second type of leverage comes into play, the leverage of other people's expertise. The leverage of other people's money, that creates your wealth faster, and the leverage of other people's expertise creates your wealth easier. And this is the most important piece of the puzzle, the most important piece of the passive income puzzle if you want to scale. You don't want to interview endless people to find just the right tenant.

You've got people for that. And you don't want to receive calls about leaky faucets. No, you've got people for that. You don't want to fix the air conditioner when it breaks down. No, you've got people for that. You know, if you bought a McDonald's franchise, you wouldn't clean the grill, salt the fries, and man the cash register, would you? you? And if you did, well, your income wouldn't be passive, wouldn't it? Well, the same goes for real

estate. I mean, most people think if they want passive income from real estate, they're going to have to manage the real estate. Most people, sadly and tragically, they're deterred from real estate investments because they don't want the headaches of being a landlord. It's nonsense. That's not how it's done. You don't manage real estate. You manage managers to manage real estate. That one distinction right there, depending on the size of your real estate portfolio, that's the difference between four hours a day and four hours a month. Big difference. Yeah, but leveraging money, that's risky. Leveraging others to watch your money only compounds that risk.

True, to some degree. If you do it wrong, absolutely false if you do it right. And this is going to be a step-by-step process here I'm going to share with you to virtually eliminate your risk in real estate. You see, risk management begins with your strategy. You must have an income-based strategy, meaning you do not invest a single dime into a single property unless it pays you more each month than it costs you to own it.

When a property pays you more than what it costs, what's left is called cash flow. That's your passive income. So you don't wait for appreciation to buy real estate. Buy for cash flow and wait. Do not gamble on appreciation. Do not try to time. the market, do not speculate, period.

Appreciation, that's great, and it's going to happen. But it's the icing on the cake. Invest for cash flow. That right there, that's the cake. And that's where risk management begins. Now, risk management resumes and strengthens through diversification. You're going to want to diversify your portfolio, specifically the locations of your properties.

You may have heard that real estate is local, yeah? Indeed, true. You see, by diversifying your real estate investments geographically, you protect yourself from natural and economic risk. And we're not done here with just that. We've got more to eliminating risk. And I'm going to show you what there is to do next to minimize risk even further. And this risk management tip, it costs me $300,000 to learn.

And I am going to give it to you for free right after this. Do you have doubts about your current plan for retirement actually panning out? Imagine revolutionizing your retirement plan so that it pays you right now and in retirement. Change one thing one time and that revolution can be yours. That's bad news for Wall Street. But great news for you. We are cash flow savvy and we'd like to offer you free information that will show you how one simple tweak can cause your retirement plan to pay you right now. And in retirement and it's yours for free.

For the secret your financial planner doesn't want you to know, go to cashflow savvy.com. That's cashflow savvy.com. And now. back to creating your epic wealth. Real estate is so risky. You've heard that before, right? It's so risky. No, it's not.

No, it's not. Not if you do it right. If you do it right, it's actually the safest investment option you have. So step one in risk management is to invest for cash flow. That's step one. Forget appreciation. Meaning, it's great.

Appreciation, it's going to happen for you. Just don't factor it into your decision process. If a property doesn't produce positive cash flow, then you don't buy it, period. That's step number one. Step number two in risk management is to diversify the geography of your portfolio. Don't have all of your portfolio in one market. By doing this, by diversifying the geography, you protect yourself from natural and economic risks, stuff that's local, those local risks. So you want to diversify the geography.

Now, step three. and I bet you won't hear this anywhere. No, this tip I'm about to share with you cost me $300,000 to learn. And I'd have liked to have paid a coach $100,000 for this tip. That would have been a bargain. Instead, I went to the school of Hard Knocks and paid $300,000 for this lesson, and I'm going to give it to you for free. So here it is.

Step number three is to diversify your teams. Step two is diversify the geography of your real estate. Step two is to diversify the team. that run your real estate. You're going to want to have at least two property management relationships in each market. You need at least two property management relationships in each market. You need two realtor relationships in each market. And you need two licensed contractor relationships in each market.

Now, here's the secret. Here's the secret to managing your risk by diversifying your teams. It's to make sure that they all know about each other. You see, by keeping no secrets about who you're working with, you're quickly going to notice how operating costs, those tend to drop. Oh, my gosh, what happened to all the repairs? And property performance tends to rise. Oh, my God, all the rents are showing up on time.

And my tenants are staying longer. It's a big one. Keep no secrets about who you're working with. I wish someone would have told me that, you know, when I got started. But they didn't. And I had to learn this one the hard way. Like I said, this was a $300,000 lesson. And when we meet, when our path,

cross, ask me about it. I'll tell you all about it. It's a great story. It's a very expensive story and very painful at the time, but it does make for a good story. So when we meet, ask me about it. All right. So step three, diversify your team. Step four, the next one is to diversify your property types. If you start with single family properties like most people do, after you've got several of those under your belt, you know, start looking at duplexes, start looking at fourplexes and kind of start, you know, with the intent or the mindset of that you're going to be working your way up to larger multifamily properties. And then potentially to commercial properties and bigger developments.

You see, diversifying your property types, that's going to strengthen your equity and your cash flow positions. It's going to preserve your wealth a lot better. Okay. So here's how my business is set up. I'm working currently in 12 different markets. And in each market, I have a project manager that manages my teams. I have one project manager that manages my teams.

Then each team consists of. of a property manager, a contractor, and a realtor. Now, each team, like I mentioned, is aware of the other's existence. And I do this intentionally because that this inherent element of competition, it increases performance and it decreases expenses. And my clients and I benefit significantly from this.

You see, in many of my markets, the combined portfolios of my clients and my personal holdings, a lot of my properties or right next door to my client's properties, that makes up a significant portion of each team's business. And what I've found this to result in is preferential treatment. Simply put, my clients and I are able to leverage each other's portfolio for stellar management of our assets. And I have the same setup in each market. And the people that work with us, they benefit from our relationships and the sheer volume of business that we represent to each team.

team member. Because if they upset one of us and they lose our business, they lose a good portion of their business. It's going to be painful for them. Now, I remember in one of my clients' Memphis property, Sandra, she had a pretty significant bathtub backup in one of our units. And no need to spread the details because they're not pretty. I mean, just imagine the worst type of sewer backup you could imagine. And then multiply that by two. And this had happened on a Friday evening. And I got a call on Saturday afternoon for my property manager. And he told me that the entire, he told me the entire story of how much damage there was

and how awful the smell was. And he just kept piling it on and piling it on on the story of what had actually happened. And he kept on saying, well, this is what needs to be done. And all I could hear in my head dollar signs. Chich, chich, ching, ching, and not good dollar signs, bad dollar signs, dollar signs leaving me. I mean, how much is this going to cost me?

And he then finished the story with, but don't worry about it, Matt. Love you guys, love your business, and I'm going to take care of your client. My guys are over there right now, and within the hour, that place is going to look as good as new. And by the way, Matt, I picked up the tab on this one just for you to show my appreciation for all the business you've given us. And he said, enjoy the weekend, and he hung up the phone. Now, my property managers, they don't pick up the checks very often, but they do make our properties a priority. That's what strength and numbers does.

for you and that's how my clients collectively benefit from each other. Further, my clients, they're busy people and they're smart people and they understand that. If you want real estate done right, you don't do it yourself. Meaning by the time they would find a deal, book their airfare, rent a car, pay the hotel, pay for their food, fix the property, find a tenant for the property, interview and hire a property manager, and then taking into account the number of days they'd have to take off work, they might have well have just paid our fee and had us do everything for them. It'd be a wash, right?

Actually, when you work with us, it's better than a wash because the seller of the property pays our fee. You know, the clients don't pay a fee, the seller pays the fee. Our clients pay us nothing, which means it's straight profit for you to have our team do all of the work for you. Not to mention, you save something even more valuable than money. Your time. You know, there's a deal that we closed in Indianapolis recently with First Cheryl.

She's out of San Francisco. Property was valued at $135,000. She got it for $125,000. So $10,000 under fair market value. She's got a long-term tenant with a lease in place for $11.50 per month. Right there, that's a cash on cash return of 13%. And then there's another property we just closed recently in St. Louis for Raymond. He's out of Richmond, Virginia.

and his property was valued at 110. He got it for 97. And he's newly rehabbed. Got a tenant in place. The tenant is paying $8.75 per month, giving Ray a cash on cash return of 12%. And then we closed a deal recently with Gary, Gary out of Pasadena.

And we did this deal inside of his 401K. Gary had about $100 grand in his 401K, just sitting there. So we set Gary up so that he could self-directed. his 401k and invest in real estate. So his property is in Birmingham. Birmingham, Alabama is valued at 145. He picked it up for 139, so 6 grand under market value.

He had a long-term tenant in place paying $1375 per month. Now, Gary, he only had to use $27,800 from his 401k as his 20% down payment. And in about 18 months, his property had appreciated 6% to 153. In 18 months, it appreciated 66%. Bumping his 401k value from 100,000 to 225.9 and a cash on cash return from his rental income was 13.5%. All in a tax-free environment. He more than doubled the value of his retirement account with one transaction. Well done, Gary.

Nothing makes me happier than to see results like yours. So now you've seen how I've set up my business or you've heard how I've set up my business to leverage the expertise of others and virtually eliminate their risks. And you've seen how my clients benefit from that as well. But enough about them. Enough about me. Let's talk about you. And we're going to do that right after this. If opening up your financial statement each month is about as exciting as watching paint dry,

The Epic Wealth Fund may be the next investment opportunity for you. The Epic Wealth Fund invests in distressed real estate and shares the profits with its shareholders. If you're an accredited investor who has already enjoyed success elsewhere in their business or investing life, and you're seeking a broader exposure to real estate in your portfolio, on a passive basis, the Epic Wealth Fund's executive summary is available for your review. Go to EpicWealthfund.com to review the funds executive summary. Epicwealthfund.com. Real estate investments involve a high degree of risk. Residential income and returns may vary and are not guaranteed. Past performance has no indication of future performance. Nothing herein shall be

construed as investment, tax, legal, or accounting advice. That's it for today. We'll pick up from where we left off right here next week. See you then. This podcast is a part of the C-suite Radio For more top business podcasts, visit c-sweetradio.com.