Epic Real Estate Investing - Uses of Leverage and Risk Management Techniques Your Financial Planner Will Never Share With You - Epic Wealth Wednesday | 265

Episode Date: May 10, 2017

Securing financial freedom requires thinking outside the box about diversification. Your financial planner probably won’t tell you about it, but Epic Real Estate Investing has a unique approach that is the surest and fastest path to wealth. Take a fresh look at your financial planner's idea of diversification, realize the power of passive income investing, and leverage a little time now to secure a lot of cash flow later.  Unravel the secrets to financial freedom with Epic Wealth Wednesdays and Epic Real Estate Investing. ______   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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Creditbump.com. That's creditbump.com. And now, back to creating your epic wealth. All righty. So we've done a lot of discussion this week and last week about what there is not to do and what there is to watch out for. But what is there to actually do? that's what we're going to discuss now. And to begin, I want to kind of lay some groundwork.

I got a question for you. Do you remember when Forrest Gump famously said, Life is like a box of chocolates. You never know what you're going to get. You remember that? Classic line, right? Certainly already cemented its place in movie pop culture. But let's think about that.

How do you not know what you're going to get inside a box of chocolates? I mean, wouldn't you absolutely always expect to find some sort of chocolate. You're not going to possibly find the keys to a Ferrari or a gold coin or a Rolex, are you? No, of course not.

Now, to be fair to Old Forest, I know what he means. In the limited context of a box of chocolates, you know, you may have different flavors. You may have some with nuts, some without nuts, you've got different fillings. You know, you've got different types of chocolates. But to Forrest, that made it all

a really big adventure. But unfortunately, this limited forest gump view of what variety means is exactly the same mentality traditional investment brokers use when they talk about investment variety, or their word for it, diversification. See, diversification is one of the largest cornerstones of wisdom taught to clients in traditional investment vehicles like mutual funds. Clients are taught that diversification is a key element to providing a safe portfolio for the long term.

Now, to stock brokers, diversification means simply purchasing stock in different companies, in different industries, in different sectors of the economy, and then breaking up your holdings between stocks, bonds, and cash. That's how brokers define diversification. And it might even be what your definition of diversification is right now. I mean, I know some of you that are listening to me, you know, you're already convinced about the power of real estate and you've been convinced for a while. Now, others of you, though, may already be even successfully investing in other more traditional

vehicles like stocks and bonds and mutual funds. And you've heard the buzzwords like diversification. And the thought, just the very thought of investing in real estate, while intriguing, very interesting, may seem like such a departure from what you're used to that it almost seems like you are breaking the rules. Now, in case this describes you, today I want to ease you into the thought of purchasing real estate by embracing, not dispelling, the investing wisdom your broker may have taught you. And to help you get the forced Gump mentality out of your investments. In reality, there are three major classes of investments, and they are not called stocks, bonds, and mutual funds, contrary to popular belief.

The first one is called paper investment instruments, which is what you are investing in when you are purchasing stocks, bonds, and mutual funds. And while they may sound different, at the end of the day, they are all market-driven. They're all in the same box. Having a variety of these chocolates, as it were, does not make you truly diversified. You feel that you are, but you are not. I mean, sure, on a hot day, your milk chocolates may melt faster than the dark chocolates. I mean, when the stock market melts down, maybe your stocks fall faster than your bonds.

But there's nothing directly under your control here. You've just purchased multiple seats on the same train. And guess what? You're not steering, and there are no brakes. This doesn't mean paper instruments don't belong somewhere in your portfolio if you feel they're right for you. It just means that you may be operating with a false sense of diversification. and thus a false sense of diversification's promise, which is safety, which is security,

a false sense of comfort. You know, getting completely outside of paper instruments, the second truly separate asset class you can invest in are businesses. And being specific, businesses that can be scaled to run with or without you, specifically without you, preferably without you. and you may do this actively or passively.

For example, if you're an architect and can actively train other architects to create designs, to create buildings, and a sales team to go out and find the clients and take care of those clients, then you can sit back as an owner and just collect the proceeds. And then you can work more on your business and not have to work in the business. on the other hand, if you passively lend your cousin's architecture firm $50,000 at 10% interest so that he can expand his operations, even if your architectural skills don't allow you to draw stick figures very well, you are still investing in a business. That's the second asset class, business. The third, and quite frankly, the most versatile asset class, that's real estate.

Now, you already know my passion for real estate, specifically cash flowing real estate, specifically income generating investment grade real estate. And you know my passion for its power to create true wealth for an average person in a reasonable period of time. In a very quick period of time, all things considered. This is the asset class I chose to embrace, and I used it to successfully deliver myself to financial freedom's front doorstep in less than four years. Three years, eight months to be exact.

So getting back to the notion of diversification, now that you can clearly see the vast differences between the three investment classes, how is it that the vast majority of us equate investing itself with only one investment class, with paper instruments? Well, it's simply because paper instruments are the easiest to sell.

They are absolutely everywhere in our lives. They're inside of our 401Ks. They are inside of our pension funds. And they are splashed across our TV screens as the right thing to roll over our retirement funds into. Paper instruments are inescapable in our culture, in our society. But they, in reality, only make up a small part of what investing actually is. In fact, I would argue that someone that owns three children, churals and one income property is diversified into more investment classes than someone with a

typical mutual fund portfolio consisting of hundreds of company stocks. So if you're going to truly embrace your broker's wisdom to diversify, shouldn't you be taking them up on that and looking outside of paper instruments altogether? The next buzzword brokers like to teach as wisdom is the concept of rebalancing your portfolio. And what this means is that when one piece of your portfolio is up, then sell some of it at today's high price, and purchase more of another piece of your portfolio that may be down in price. Rebalancing, by its nature, it's a capital gain strategy, typically meaning that when stocks are high, sell some and buy bonds. But of course, this rebalancing always takes place in the same box of chocolates, paper

instruments. This is simply because brokers aren't set up to sell anything else. most especially not physical investment grade real estate. So for them, nothing else exists. But now that we can look at all three investment classes as a whole, let's take a look at what some rebalancing and diversification may look like. For instance, I keep seeing in the news that the stock market, you know, it's going up and down, up and down, but it is technically at an all-time high.

if we are truly going to rebalance and diversify the paper instruments we own at these high prices and you don't have a cousin with an architecture firm looking for partners, couldn't maybe it be time for some real estate? As for me, yes. I diversify and rebalance within my real estate portfolio, but I do that through investing in different parts of the country and in different property types, all with the complete emphasis on cash flow. It's an income-based strategy.

and I run my investments as a business. I am so fundamentally cash flow focused that I don't necessarily see myself reverse diversifying back into paper instruments. Except perhaps as I guess maybe a place to accumulate some cash while I seek out my next investment property. Anyway, I can get into all of that later, but for now, I hope you got what you needed to take a second look at the Forced Gump style investing you might be doing. I also gave you some great buzzwords to use to, you know, to still keep your street cred over at the firm. In all seriousness, I do hope this helped you think a little bit outside of that box and helps you get closer to your financial goals. I mean, if there's anything you'd like to think through with our fantastic team over here, we're always here to help. Go to cashflow allies.com and download our investor package of which includes the top 10 cash flow markets in the United States.

and you know what, you might even get a chance to speak with Mercedes, who is a wealth of information more than I even on today's discussion. You know, as I like to say here, it's never a money problem. It's merely an idea problem. And that's what we're really good at, ideas, creative ideas, on how to start building your income portfolio, how to grow your income portfolio, how to access multiple sources of other people's money

to help you grow your income portfolio. And I think that's what is given, us a real insane advantage over most real estate investors, meaning I didn't have any money when I got started. So I didn't have the option to throw money at every single problem I encountered to make them go away. I had to get creative. I had to come up with ideas to solve my challenges without money. And today, I've got money. But I still use as little of it as possible to build my portfolio. I mean, why would I use it if I don't have to? If I built what I've got without money, why would I implement its use now? My point is, it's never a money problem, just an idea.

problem. Next segment, I want to go over how to virtually eliminate the risk from your real estate investing right after this. Do you have doubts about your current plan for retirement actually panning out? Imagine revolutionizing your retirement plan so 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're 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.

All righty. So how does one virtually eliminate the risk from their real estate investing? I mean, it almost sounds impossible, doesn't it? Because we all know. at least one person who has lost big in real estate. Maybe you know many people that have lost big in real estate. Maybe even someone a little bit closer to home like you. Maybe you lost big in real estate. You know, whatever made sense to me is how real estate, how it's responsible for creating so much wealth,

more wealth than anything else, but it still holds on to this risky stigma in our society. How can I create more wealth than anything else, but also be the riskiest thing out there. Those two, they can't go together. It doesn't make sense. But they do. They do in our society.

And here's why. You see, most people that play in real estate, here's the issue that is they aren't investing. They're gambling. They have a flawed strategy. In fact, there are really just three areas where people can lose money in real estate. And if you can cover these three bases,

it's pretty difficult to lose. So the first is a contractor, a bad contractor. A contractor can make or break your project and your bank account. Second, a bad property manager. A property manager, they can make or break your cash flow, your income, your streams of cash, your overall livelihood. You're at their mercy of their production and their performance. So you want to do as much due diligence on your contractors and your property managers as you do the properties themselves. Contractors and property managers, they're like dentists, like,

who dentists are to us and who car mechanics are. And, you know, when you find a good one, you got to hold on to them and you want to treat them well. You want to make sure that they get a Christmas card. Because, you know, good Dennis and good car mechanics are worth their weight and gold and so are good contractors and so are good property managers. Now, if you have dependable and competent property managers and contractors on your team, what you've done right there, you've eliminated probably 50% of all the risk that exists in real estate. I mean, boom, just like that. With those two people in place, half your risk is gone.

The remaining 50% of the risk, that lies within your strategy. And that strategy for most is appreciation-based. Now, don't get me wrong. Some do really great with appreciation. Some do really great with an appreciation-based strategy. And some don't. Just as many don't. And the reason is, it's not investing.

It's gambling. Sometimes you win, sometimes you'll lose. So you can win big and you can lose big. It's gambling. Now, I love my appreciation. Don't get me wrong. But you just got to keep it in its proper perspective. Appreciation, it's the icing on the cake.

It's not the cake. Income is the cake. Cash flow. Now, there's your cake. That's the cake. And just by shifting, to an income-based strategy from an appreciation-based strategy, just by making that shift going from appreciation-based to income-based,

you are miles ahead from a risk perspective. And if you make it a trilateral income-based strategy, you can blow the appreciation investors right out the water on both risk and returns. So a trilateral income-based strategy, what is that? Well, it's one that consists of three different. different income strategies. A fast strategy, one that produces today money. That might be a transactional funding or hard money lending or maybe wholesaling properties, really quick flips. That's your fast strategy or a fast income strategy. Then you have a medium-paced strategy. That's one that produces tomorrow money. That could be your single-family buy-and-holds, maybe your duplexes and four-plexes. That's your medium-paced strategy, produces tomorrow money. And then a slow strategy, one that produces future money. And that's going to be your bigger projects, like your land developments or your commercial buildings or your large multifamily buildings where you have to go in, you have to do a lot of rehab

and you've got to go in and rework the management and increase their performance. And then maybe swap out some tenants here and there. Those are long-term projects. But what they do is they provide long-term security. They're stable investments. Now, when you have those in place, real estate really becomes a very beautiful thing. when you have those three strategies in place, those three income strategies in place. And here's why you need all three.

If you just have the tomorrow money and the future money, what happens is you lack the funds. The typical risk that you're at risk of is you lack the funds to run your day-to-day operations. And so you never really get to that tomorrow or future money because you're always struggling today. And if you just have the today money and the future money, the typical risk is, you're just kind of always waiting for the big payout. You've got money to run your operations, don't have really any tomorrow money. And, you know, your today money is getting eaten up by your operations.

And you never really get the resources or the manpower to develop the long-term future money to create that stability in your life. And if you just have the today and tomorrow money, well, this is a little bit misleading because a lot of people run their business this way with the today and tomorrow money. Because things get really exciting here because you are making good money. because you're making money today, you're making money tomorrow, you feel like you're prospering. But what happens here is you're typically really vulnerable to market conditions. And because you don't have the future money strategy in place, you don't have long-term security.

So you need all three. You need all three to get the best of all the worlds. You need the tomorrow money, excuse me, the today money, you need the today money, and you need the future money. If you have a good contractor in place, a good property manager in place, and a trilateral income strategy in place, it's really tough to lose money in real estate. Really tough. And this is how I set up the epic wealth fund.

I set it up just like this to protect my investors. So what I want you to do is I want you to look at your current strategy, look at your current portfolio, look at how you're potentially or you're currently running your real estate investing business. Look at that and bounce them off of each other. measure it against this of the good contractor, the good property manager, and this trilateral income strategy. Compare. Compare what you're doing to what I just explained to you. And what is

missing? Do you want to ask yourself that question? What's missing here? And how can I, how can, what can I put in its place? And how can I put something in its place to protect me and to virtually eliminate my risk? How can I put the pieces together? It's a lot of work. I'm not going to, I wouldn't say that it isn't. But, what is high reward no risk worth to you? I mean, if you don't want to take on the heavy lifting and you're an accredited investor, I don't know, maybe hopping on our back and going along for the ride, that's going to make sense for you.

Maybe that's going to be a good fit for you. If so, you can go to epicwealthfund.com, download the executive summary, and you be the judge. Epicwealthfund.com. Regardless of how you do it, whether it's on your own or you come along with us and you do it us, you need good property management, you need a good contractor, and you need a trilateral income-based strategy for your real estate investments. All righty?

It's been an absolute pleasure today. I'm getting used to this time with you and it's really, really great. So I will see you here next week as we continue to create your epic wealth, as we continue to build your epic wealth. If opening up your financial statement each month is about as exciting as one, you know, 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 fund's 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 is no indication of future performance.

Nothing herein shall be construed as investment, tax, legal, or accounting advice. This podcast is a part of the C-suite Radio Network. For more top business podcasts, visit c-sweetradio.com.