Cash Flow Guys Podcast

For many, buying a property with non-paying tenants or squatters residing there would be a red flag. I see such a situation as a huge opportunity to negotiate a great deal. Landlords that have non paying tenants are most often in deep financial trouble if they have a loan payment to make every month.  This is because most landlords only see a few hundred dollars of profit per unit because the rest goes to the bank. Non-paying tenants mean that the owner needs to make those mortgage payments even though the tenant is not paying.  Although some landlords can handle this financial burden, most can’t for very long. Statistically speaking, 24% of multifamily tenants have not paid their rent in full as of Sept 6th, 2020 as compared to only 18.8% in September 2019 according to NMHC.org (National Multifamily Housing Council.  That tells me that there’s a good chance the landlord either has or will have non paying tenants in the near future.  Now is the time to get the attention of these landlords. How do you find these sellers?  The same way you would find motivated sellers for any other reason, we target market them. Direct Mail Paid Social Media Ads Billboards Bandit signs Print Ads in Newspapers Advertise in Trade magazines that target Property Managers and Landlords NARPM.org National Association of Residential Property Managers On the first contact, don’t be surprised if the seller is resistant to share their financial woes with you.  I would imagine that most landlords would be somewhat offended if you called them out of the blue and asked if they had non paying tenants.  Instead, attract them with a targeted marketing message. As a buyer, you can help them in several ways.  Motivated sellers in financial crisis are proven to be far more receptive to creative options as compared to unmotivated sellers.  If the most pressing problem is non-payment of rent, the owner might feel helpless due to recent moratoriums on eviction.  The good news is as a real estate problem solver, you can step in and help.   Why should you buy these problems? You can analyze the deal upfront and allow for reduced or no income for 6 months to a year.  That means setting aside an amount equal to the non collected rents to cover expenses that will occur once the property is yours.  These amounts can be taken from any equity due to the seller.  You can also raise this money from your funding partners in advance of the purchase. Structured properly you will be able to create incredibly profitable deals for you and your partners/investors while helping a seller avoid further pain and torture. Negotiating terms will be easy (if you let it be) because the sellers will be incredibly motivated with unpaid expenses hanging over their heads. The current eviction ban crisis shifts the market from being a seller’s market to a buyer’s market pretty much overnight if the property you want is occupied by a non-paying tenant.   Here are the facts you will have to share with the Seller. The tenants are not required to pay a penny for the rest of 2020, and that date could be extended even farther.  Any unpaid rent and late fees do accrue which means they must be paid at some point in the future. When evictions ARE allowed, imagine the backlog that is forming and building every minute of the day, it could take a very long time to get your case heard. If the tenants are paying now, there is no guarantee that will continue, job losses will continue. Our elected officials cannot agree on the stimulus or unemployment extensions, don’t be shocked when nothing happens until at least November on that front. If rent isn’t coming in, it will be even harder to keep up with maintenance because of a lack of available funds. The situation gets worse every month and likely will not improve until 2021 or later. Face facts, squatters aren’t known for keeping their homes in great shape, expect renovations to be required once you finally have a chance to evict them. At a minimum, trash outs will be necessary which can cost several thousands of dollars in some cases. COVID 19 is still a thing, which means people will expect the home they rent to be super clean, if not they will likely pass, which means increased vacancy. Seller’s can’t really claim rent increases are possible based on current affairs and our financial crisis looming. The lofty projections of many apartment syndicators will prove to be inaccurate causing investor concerns and in some cases, operators might be replaced.  This could mean that apartment deals may reenter the marketplace. Tune in to this week’s episode to get the details on how you can structure awesome deals in situations of non paying tenants.  

Boy oh boy do I have news for YOU! This week the CDC (Center for Disease Control) issued a nationwide ban on evictions that is estimated to last until December 31st, 2020.  When I first heard about this I thought it was some sort of hoax because last time I checked, housing was not part of CDC’s focus. To go directly to the order to read it yourself go to: http://cashflowguys.com/cdc The CDC Eviction Ban order applies to ALL Landlords, regardless of what mortgages they have in place (previous orders applied to FHA Loans only).  The only exceptions available apply to hotels, motels and short term vacation rentals. You should know that in order for the ban to apply to your tenant, the new order requires that tenants supply a specific written declaration to the landlord for the new policy to apply.  Look at Attachment A on the CDC website link for details on that. According to the CDC, the intent of this new order is to help stop the spread of Covid-19 by discouraging people from moving during these times and to lower the likelihood of homelessness which they feel will increase the spread of the virus. What’s interesting about their reasoning is that many prisons decided to release prisoners into the streets for the same reason (to reduce the spread). If you use the link above it will provide direct access to the order which you can (and should) read.  The information in this order is important to know even if you don’t own rental property. As a future buyer, you can rest assured that this order will result in many landlords trowing in the towel on landlording and therefore want to sell their property.  I would imagine that most landlords can’t survive 6 months with no rent payments. When new regulations impact owners of property, investor buyers can often put together great deals as sellers look to flee the market. A savvy real estate investors pays attention to the shifting market conditions and new regulations that would provide a negative impact on investment properties.  Situations such as these create motivated sellers, which means great odds in acquiring properties with attractive purchase terms. The upcoming housing market and economic crashes will provide never seen before opportunities to buyers who are ready to buy and are willing to solve problems for anxious sellers.  

In last week’s episode, we discussed the most common misconception believed by wholesalers. For those that missed it You Don’t Need a Cash Buyer to Wholesale Real Estate. This week, we will discuss another popular misconception that involves licensed Realtors. Some Realtors tend to believe that much of what investors do is somehow shady or illegal.  In my own experience, I have had at least two dozen Realtors tell me that they believe Seller Financing was illegal.  When pressed for more details on why they believe this, they often shut down. The real issue here is that fear can easily overcome someone’s emotions when they don’t understand something.  Also, when they realize that they should be better versed on a topic than the general public embarrassment kicks in.  If you keep pushing the issue the conversation can go downhill fast. Rest Assured, Regardless of what your Realtor says, Seller Financing is NOT illegal. In cases where you are shut down by a Realtor when trying to offer seller financing, you have a few choices to solve the problem. Fire the Realtor if they are representing you as the buyer’s agent and find another who is versed in seller financing. Move on to another property if the listing agent is the problem Write the offer anyway and politely insist that the agents present your offer as written. Wait for the agent to fail by the listing expiring due to it not selling and only then go directly to the seller. (Please do not try to go around a Realtor, direct to a seller on a listed property) It’s important to note that quite often Realtors will make it challenging to proceed with any offers if you go against what they tell you.  To overcome this you will need to build some rapport with the agent in your way so they don’t see you, or your methods as a threat to them. Larry Harbolt said it best when taught me “Seller’s don’t need cash, they need whatever they feel cash will do for them” Make no mistake, they don’t want a pile of dirty cash to paper their walls with, all sellers plan to spend that cash on something else they want more.  Your job is to learn what they value more than cash so that you can possibly provide that to them.  In many cases, value can be added by making it easier for the seller to do whatever they intended to do with the cash.  Here is an example: Let’s assume the seller has an unpaid medical bill for $20,000.  Because you are a great negotiator you tell the seller that if they give you credit for a $20,000 down payment, you will take care of that $20k medical bill for them.  The seller would then give you a limited power of attorney so that you can negotiate with the medical billing company on their behalf.  You then negotiate that debt amount down to $10k and make payment arrangements directly with the medical billing company.  By accomplishing this, you just cut your down payment in half.  You will only have to give $10k up in order to get the benefit of a $20,000 down payment, see how that works? This method can be applied to just about any situation if you have built a rapport with a seller and they believe you will follow through with solving their problem.  Does the seller want a boat? Cool! What kind, color, size, etc.  now go find that boat and make arrangements to buy it in such a way that as the buyer, you can get the boat at a steep discount or on terms.  Then, give the boat to the seller in exchange for a down payment.  Presto!  Win/Win created!  Want more ideas?  Take a listen to this week’s episode to learn more...

One of the most popular myths I hear in real estate is that wholesalers need cash buyers to complete a deal.  While I must admit, closing a transaction with all cash is undoubtedly quicker in most cases, the reality is that many super-profitable transactions get ignored simply because the buyer is not using cash. In most cases, it’s the disclosure of the wholesaler’s fee that brings forth this false belief.  When advised of something they don’t understand, Lenders, Realtors, and title companies sometimes stomp on the brakes halting the transaction progress.   The simplest way to avoid the drama of having a deal go sideways over your fee is begin with a stable relationship with your buyer.  When you invest time getting to know them and understand their needs, transactions will go much smoother for you.  Buyers work with wholesalers to simplify the acquisition process, saving them considerable amounts of time and marketing costs.  Therefore, when you build a mutually beneficial relationship with them, everyone wins. In my previous episode, I discussed the practice of finding houses for buyers, not the other way around.  With this arrangement, your fee is covered by the buyer, not the seller.  Such a format removes the seller’s opportunity to object to your compensation since they are not responsible for paying it.   Traditionally wholesalers tend to be paid at closing, which means their fee is on the closing disclosure.  Having the wholesale fee on the closing statement can be a red flag for title insurance issuers and lenders; instead, draft a separate agreement between you and the buyer, which breaks down the amount of your compensation and how it will be paid to you.   You can still be paid at closing by the buyer, and such an arrangement does not need to involve the closing agent.  Additionally, you can collect a portion of your fee (or all of it) when you sign the assignment agreement and the buyer. Another solution (and my favorite one) is to accept monthly payments over time with interest added.  I offer this to my buyers because it means much less cash out of pocket when buying the property.  Such an arrangement means they have more capital available to renovate the home to prepare for resale or rental.  Its good practice to draft a note and mortgage outlining the terms and conditions agreed upon with the buyer.  Once the paperwork is signed, the mortgage should be recorded against the deed so that the loan is collateralized. By accepting payments; you create a stream of income for yourself while earning interest on the unpaid principal balance. The truth is that many buyers who are considered “cash buyers” use loans such as home equity or cash-out refinances against other properties they own to borrow the cash they need to buy the wholesale deal in the first place.  How many more transactions could you close if the buyer could use a bank loan to buy the property?  Could more deals get done if you remove all of the roadblocks? Fact: Wholesalers who learn how to employ creative acquisition options earn far more money than those who only limit themselves to dealing with cash buyers only.

In this episode, I discuss the one secret to success in wholesaling.  You might think its some new shiny software widget, or perhaps some super-secret wording on a postcard, but it’s even simpler than that...  I see lots of wholesalers advertising properties for sale, in some states, they are asking for grief from the authorities.  You see, in most areas, only a Licensed Real Estate Salesperson may advertise real estate for sale that they do not own in exchange for a fee.  Trying to find the right buyer for a house is far more challenging than finding a house for a buyer.  As a wholesaler, imagine how much easier it would be if you could simply go shopping for a qualified buyer, knowing exactly what they want, how they intend to fund the purchase, and how much they are willing to pay.  This method makes wholesaling EASY so why not do things the easy way?  Finding qualified buyers can be challenging because there are lots of “tire-kickers” out there.  To make your life easier be sure to qualify any buyer you intend to work with to be sure they have the ability to close.  If a buyer doesn’t have any of their own funds to invest be weary because they may not be able to secure the funding they need to close on your deal.    Wholesalers, Are you having a tough time finding cash buyers?  Partner up with a hard money lender in your market that has a good reputation.  Introduce them to your buyers so they can be qualified as a buyer.  This step will save you a ton of grief and time sitting alone at the closing table.  Working with well-qualified buyers who can prove their ability to close will save you tons of time and embarrassment caused by a pretender buyer who flakes out on you at closing.  As a wholesaler, when you focus on finding houses for buyers you will save a ton of time and energy on marketing because you can refine your efforts to a specific type of property in a specific area.   

In this episode, I am going to cover a topic never before discussed on this podcast.  Before I go any farther I want to begin by stating that nothing contained in this episode should be considered investment advice.  I am NOT an expert in precious metal investing, therefore you should conduct your own independent research before considering any financial investment. There, with that said, let’s dive in, shall we? When I was young, my Grandpa used to tell me to always keep a silver coin in my pocket.  He gave me my first one.  His logic was that as long as a man had access to “God’s money” as he called it, he could weather just about any financial storm. I remember as a boy him grumbling about our elected officials of the time, Gerald Ford if memory serves me correctly.  Grandpa was complaining about Federal spending and devaluation of the dollar being a problem.  At the time I was clueless about what he was talking about because I just wanted to focus on my fishing. When I grew older, a friend told me to trade in my silver and get gold because it was worth more per ounce.  Not knowing any better that’s exactly what I did which I realize now might not have been a smart decision because I had no real logic involved in the choice I made.  Lesson number one of investing for me was to never take advice from people who aren’t willing to learn new things. In recent years my wife and I invested a great deal of time learning about economics and financial markets.  For us, investing a portion of our cash into precious metals made good sense so that we could insure ourselves against a devaluing dollar.  Gold and silver do continually appreciate over spans of time and look to be not very volatile over the long term.  For us, it makes sense to hold physical gold and silver bullion as a hedge against inflation as well. In our journey of learning, we have found several great resources that I want to share with you, links to these books will also be on the Cash Flow Guys Website. I’ve learned over the years that I need to make sure I am never the smartest person in the room I am in, if I am, I’m in the wrong room. Here is the shortlist of the people I follow to keep up to date on the state of the economy and all things precious metals: Mike Maloney GoldSilver.com Peter Schiff schiffradio.com Jim Rickards Dana Samuelson American Gold Exchange Amergold.com   Books: Stack Silver Get Gold by Hunter Riley https://amzn.to/2ETnu81 Guide to Investing In Gold and Silver - Mike Maloney https://amzn.to/2XRcgYD The New Case for Gold - Jim Rickards https://amzn.to/3ih86kw The Death of Money- Jim Rickards https://amzn.to/31qicJ1 Aftermath Seven Secrets of Wealth Preservation in the Coming Chaos - Jim Rickards https://amzn.to/2EZ8w0t Times are strange right now and are certain to get stranger.  If you never listen to anything else I offer on the podcast, please at least take the time to read about the benefits of investing in precious metals and consider taking action to preserve your wealth.

What’s pig you might ask?    Great question! a P.I.G is an acronym that stands for Professional Information Gatherer.   It was way back in 2012 when I first heard the term and decided that I was going to learn more about getting good at getting information.  Wondering if a seller will say yes or no is indeed an uncomfortable feeling. The fear of being rejected is what keeps many buyers from ever making an offer.  How do we get any deals done without facing a bit of rejection?  Short answer...we don’t.  I wasted lots of time wondering what someone would say to my offers because I did not make them as often as I should due to fear of rejection.  By spinning my wheels, I watched lots of great buys happen without my name on the buyer’s line.  Sometimes it felt like the only way I could ever get a deal was to outbid all the other buyers.  Making offers should have a strategy attached to it.  Some teach to use fancy words or psychological tactics, others teach to blanket your local market with offers on everything that’s for sale to see if something pops.  The end result of avoiding the needs of the other party is grief.  I’m not going to that blanket offers and other tricks don’t work, but in the end, the most effective methods get you to the finish line more efficiently.  When I make offers, the sellers already know what’s coming...no surprises mean smiles instead of frowns.   Here’s an example:  A guy is selling his house to pay his wife’s medical debts and needs $20,000 to accomplish that.  In my offer, I am going to make sure that his pain point is addressed by my offer, if it isn’t, I won’t make any offer at all.  When a seller understands and believes that you are listening to them and helping them solve their problems, you will have their attention and focus.  If the deal is all about you, I’d learn to get comfortable with a ton of rejection.  The more we understand a seller’s situation the better prepared we are to make offers that a seller will accept.  Many buyers think that all sellers want 100% of their cash at the closing table, yet that’s simply not true.    Larry Harbolt said it best: “Sellers don’t want the cash, they want what the cash will do for them!”  In this episode, I cover a few strategies to help you get better at finding problems so that your offers will be the ones that get accepted. 

Chasing deals is common, everyone does it from time to time, some far more than others. Those that stick with a winning strategy win, those that don’t, won’t. 100% of the truly financially free people I know got there by using the resources of others to help them to the finish line. Banks won’t allow you to get there quickly because they are in the business of making money when you buy (institutional lending can be expensive on the origination side) Hard Money loans are expensive throughout the duration loan cycle by design which is usually because of the short term involved. The raising of relationship-based private capital is by far the most economical and viable method of achieving financial freedom by acquiring real estate. I have never met anyone who escaped the rat race by using 100% of their own money to do deals, the same applies to those who use banks to fund their purchases.  If you don’t learn how to raise private money you will likely never escape the rat race. Many people feel that raising private money is difficult or maybe even impossible for them.  Therefore because they won’t learn how, they lean towards taking out hard money loans if they don’t qualify for bank financing. Sometimes they will negotiate terrible deals for themselves only because they were grateful to “be allowed” to buy anything at all. When a private money financial friend thinks about doing business with you they tend to focus more on how you will pay them instead of how much you will pay them. Therefore you must fully understand how your deal will earn a profit for both you and your investors. If you are not consistent in your investor identity people will see you as a hot mess and therefore be less inclined to deal with you. When we see a wishy-washy person, many people tend to distance themselves from that person because they are not consistent.  In this episode, I discuss how to improve your position from an investor’s perspective which will make your job of raising money much easier.

Prove it, Yep, it means what it says.  Before you close on any deal be 100% sure that the info you used to base your buy decision on is accurate.  I am willing to bet that the seller, broker, or wholesaler embellished on some of the info you believe to be true. Before you do any deal, prove the numbers by common sense due diligence. This does not mean trusting the Realtor or wholesaler that is presenting you the deal.  I am not saying they are lying however they tend to make things appear a bit more profitable than reality will prove. A wholesaler using the term ARV is the human version of Zillow and therefore is never accurate. The value of a property is what a buyer is willing to pay for it, period. When a seller tells you what a property will bring in for rent prove it before you believe it.  A great way of doing this is to look on craigslist for similar properties located in the same area and call them.  The MLS will often be a good resource of rental data for properties that have already been rented.  Tools such as Rentometer will give you a range of rents to consider but keep in mind that much of their data is mined from ads on for-rent properties, thus not a true reflection of what a property actually rented for. When a wholesaler tells you what a property will sell for once fixed up prove it with an appraisal.  The appraiser should be able to give you a good idea of what the value will be once repaired to good working order. When a Broker tells you a property is a “great deal” have them prove it with credible data.  You may find that most real estate brokers have little to no experience in any form of real estate investing.  Ask the broker if they own any rentals themselves, most don’t, therefore, be careful who you listen to when you hear the words “great deal” In this episode, I provide a real-world example of a “deal” that wiped out an investor simply because they did not take the time to verify what they were being told.  Tune in to hear about that mess and at the same time learn what not to do.

In this episode, I discuss the ten skills required to crush it in your marketplace.  These skills are well laid out in the famous book “Think and Grow Rich” from Napolean Hill.  When building a business, someone needs to assume the leadership role and real estate is no different.  In fact, not having a clearly defined, a qualified leader can bankrupt a company in short order.  As you might imagine, there’s a big difference between being a leader and being “in charge”.  It takes a ton of courage to assume the leadership role, in fact, Courage is the first of the ten I will discuss this week.  If leadership is not your thing, or you suffer from a lack of confidence, unwavering courage may be a challenge for you.  The good news is that you can bring in someone to lead the company who does possess these skills.  Being successful as an investor does not mean having all the answers, it means knowing the right people to join you who have those answers.  I believe that these people are around each one of us, and it’s our job to attract them to us.  Self-control as an investor means avoiding impulsive decisions that are based on emotion instead of logic or mathematics.  Don’t follow the crowd, lead the crowd by example.  Be the person that does all the math, not just the math that forces a lousy deal to appear to be a good one.  Having a keen sense of justice means treating all parties in a transaction fairly and ethically.  Win/win or no deal is a great mantra to follow and results in faster, more profitable growth.  Ever dealt with a wishy-washy buyer or seller?  That type of behavior can destroy a deal in a heartbeat.  Ask questions, listen for the answers, then, make decisions and stick to them.  Those that have a tough time making decisions rarely make skilled leaders.  Investors who operate from the mentality of a servant’s heart often outperform their peers.  It’s very difficult to say no to someone who clearly demonstrates that they have your best interest at heart.  So as not to spoil the episode right here in the show notes, you’re going to have to tune in to learn more.