Cash Flow Guys Podcast

In the famous book Think and Grow Rich by Napoleon Hill, “Organized Planning” is a chapter of which we will cover today.  I want to specifically address the subsection titled “Planning the Sale of Services. Believe it or not, as a real estate investor you earn based on the sale of ideas and services, not so much the buying, selling, or renting of real estate.  It’s not about the transaction, it’s about what you provide to the marketplace.  Anyone can complete a transaction if they have the opportunity and the means, but few know how to provide the service that brings forth the opportunity and the means. In the book, Mr Hill mentions the sale of ideas, which happens to be one of the ways I have achieved financial freedom. In order to master the sale of ideas or services, we must first learn how to become a leader worthy of being noticed or align ourselves with such a leader. When I was a freight broker, truck drivers came to me because they knew me as a person who had information on where they could find good-paying loads to haul.  Shippers also came to me because I had direct access to some of the hardest working, most qualified truck drivers in the industry.  You see, that’s how I made my money...by selling ideas and information. Sellers often choose to list a property for sale with a Realtor because they perceive the broker to have access to qualified buyers or know how to effectively advertise in order to capture a buyers attention. Some sellers choose to sell to a wholesaler based on the idea that the wholesaler will make the transaction quick and painless for them to rid themselves of an unwanted asset. Either way, a leader is brought in to take care of business...that’s just how life works.  Maybe you are reading this thinking to yourself “I’m not the leader type” Well, that’s ok too...in fact, I discuss that very feeling in this weeks episode.

In episode 235 I talked about the fact that the Great Escape was closer than you think.  If you have not yet listened to that episode please go listen to that episode before you listen to this one. A listener responded to that episode via a YouTube comment saying: “The flip side to your argument is that most of us don't want to just be "free". I don't make 10k a month now. But for me to be able to do all the things I want to be able to do, I need to make very close to that. I could live on half that, and pay all my bills but I would not be happy.” The commenter then deleted their comment so perhaps a lightbulb went off negating the need for the comment to begin with. In case they are still puzzled, or in the event, you feel the same way, I’d like to address this comment and revisit the core points of that episode from a different angle. Let’s break down the comment so we don’t miss anything:  “The flip side to your comment is that most of us don’t want to be just “free”   As compared to what? Staying in W2 prison allowing the government to steal from you in the form of taxes on your wages?  Tom Wheelwright wrote in his book Tax-Free Wealth “The average person in a developed county spends 25 to 35 percent of their LIFE working to pay taxes.  That means more than two hours of every workday are dedicated to feeding your government.  And three to four months out of every year are spent solely so that you can pay your taxes.  That adds up to over 13 years in your work life and 20 years in your lifetime...20 years..that’s a prison sentence.” The listener then said: “I don't make 10k a month now. But for me to be able to do all the things I want to be able to do, I need to make very close to that.” Understanding your specific freedom number doesn’t mean you need to quit earning once you reach that number.  It means that you won’t have to trade time for dollars any longer because your basic living expenses are coming in every month no matter what… This means that you will be drastically reducing your tax obligation because of HOW you earn your income and the writeoff’s you are now entitled to.  The first stage of financial freedom also means you can get to your end goal much faster...want or need $10k to be happy?  Ok, do what you just did to get free again which will be easier since now you have so much more free time. Lastly, the commenter said, “I could live on half that, and pay all my bills but I would not be happy.” The reality is that achieving a certain monthly figure will never maintain permanent happiness, as you grow emotionally, you will want to enjoy different experiences which will require more money...there’s nothing wrong with that.  The good news is that now that you are free, you have the time you need to enjoy these experiences and the time to increase your earnings to pay for them.  

I bet for some of you the name of this episode caught your attention...after all, everyone wants to know when that magical day will happen. Sorry to disappoint you, but we will not know when the market reaches the bottom until after it is in recovery. The better question is, why does finding the bottom of a market cycle matter to you?  Do you honestly believe there are more “deals” in this magical place? Who lied to you by saying the best time to buy is at the bottom of the market? The best time to buy is when the numbers make sense because you are dealing with a motivated seller or one who does not see the potential in their own asset. For them, the “asset” may be a liability by being a drain on their wallets. It does not matter what market you may be in, there are deals to be had in every market. When we let the popular opinion drive how we do business, we convert what should be a business transaction into an emotional one. Instead of worrying about public opinion, perhaps we instead focus on finding opportunities which is code for finding people to talk to. I know that while reading this, you might be thinking “Tyler, I have no money to invest right now”, yep, I hear you, $50 and a few keyboard clicks to head over to PrivateMoneyCrashCourse.com will solve that problem once and for all. I bet that very few people in your market know what your buying criteria is, what is possible if they did know?  Wouldn’t it be cool if people brought opportunities right to your front door? Maybe you have yet to learn what your criteria is, and maybe you don’t have a good grasp on what a good deal looks like...that can change by going to HowToMakeDeals.com and taking the free mini course to learn how to analyze deals. I bet that the people with IRA’s in your market don’t know you offer a service that will help them supercharge their retirement plans by teaming up with you. What if you focused on income minus expenses equals cashflow and then took that information to a seller’s kitchen table so they too can see how deals are done. Discussing the market when talking to a seller only makes sense when a crash is obvious, otherwise, avoid the conversation.

In this episode, I am going to discuss the power of leveraging a group to help you build your portfolio. The idea for this episode was born from seeing a long line of identical cars rolling down US-1 last weekend in the Florida Keys.  The cars were Nissan GTR’s that I later learned can cost upwards of $100,000 more to acquire, even if when used.  The sight of all those cars got me thinking...what if that group of 100 car owners got together and invested together into a cash-flowing asset?  Well, if they do, the next car could be paid for by that cash flowing asset.    Imagine being able to buy a $100k automobile without having to pay for it!  That’s one of the basic principles taught by Robert Kyosaki and the Rich Dad advisors.  When like-minded people get together, who share the desire to accomplish great things...they often wind up very successful!  You might be thinking that you wouldn’t be able to take part in the group because you lack the cash...but wait, do you have skills that could be extremely valuable to the group?  Perhaps you are a skilled negotiator or are willing to learn these skills.  Maybe you are great with numbers and can handle the deal analyzing part?  The bottom line is that when you spend time around like-minded people and share your shortcomings as well as talents you can accomplish things never before thought possible!  Take a listen to this week’s episode to expand your mind on how leveraging the power of a group could help you get to where you want to be. 

What is your escape number?  What I mean is... what number will it take for you to be financially free.  For me, that means that you have enough coming in from non-employment income consistently to cover your monthly living expenses.  Everyone seems to think its $10k a month...that’s what most people tell me.  I am willing to bet your number is lower than you might think.  When Jill and I set a goal to escape the rat race, our number was $4000 a month.  It would take that amount every month to cover our expenses.    We were able to accomplish that with one small deal.  As we continued to do more deals, the profits from those deals became the insurance we needed to quit our jobs...forever.  Even when I flipped properties or put on my Realtor hat and made a commission, I would divide my payday by 12 to see how it impacted my monthly income.  As I pushed forth and did more deals, we started dividing by 24, then 36 and later 48 months.  We also saved up 2 years of expenses over and above that so we could sleep well at night.  Let’s keep in mind I am not asking you to downgrade your lifestyle, nor am I asking you to suffer in any way.  Instead, I am suggesting you add up your monthly living expenses and take a hard look at the expense column.  If you are anything like me, you will most likely see more going out than you are comfortable with.  The good news is that a few slight changes to that expense column can make giant strides towards becoming financially independent. When (not if) you find expenses that you simply don’t feel are necessary, eliminate them!  Lots of people think that financial freedom means you must be a millionaire, that’s simply not true.  It’s not about piles of cash, it’s about streams of cash and more importantly, how long those streams will last as referenced above.  I’d like you to figure out what your escape number is, if you have trouble, book a time slot with me and let me help you sort that out so you can get on the track to financial freedom.  You can do that by visiting CashFlowGuys.com/asktyler 

In this week’s episode, I am changing things up a bit by doing something we have never done before.  I will be sharing (with permission) a chapter from Russell Brunson’s new book Traffic Secrets. You can pickup a free copy (just pay shipping) here: CashFlowGuys.com/TrafficSecrets What do I mean by traffic?  Traffic means driving people’s attention to your sales funnel so that you can offer them your product or service.  You might be thinking, Dude, I don’t need a sales funnel, I am a real estate investor.  I’d have to disagree with you.  In fact, without a sales funnel the failure rate for a real estate investor is quite high! Why would I say that?  Time is why.  Here’s the thing, our time is limited, we are all busy doing as much as we can to find capital and deals right?  Sometimes we are focused on funding, other times we are trying to find properties to buy, flip, or wholesale all while burning the candle at both ends. By building a sales funnel, we can harness the power of digital marketing to attract qualified leads to our real estate business so that we can educate them on the services we offer and the value we provide to the marketplace. An example of the value we provide would be when you help someone learn how to avoid being ripped off in the Wall Street casino by opening a Self Directed IRA.  When someone who lost money in stocks learns that they have the ability to self direct their retirement a light becomes visible at the end of that retirement tunnel.  The person you help then feels compelled to choose you as the person to invest their money in because you have already provided them valuable information. Another example of providing value would be to teach a homeowner what they need to know to sell their house themselves and therefore avoid paying a real estate commission.  You can even go so far as to provide them free resources to help them be successful, you will find that the majority of people would just rather take the easy road and sell their home to you or have you find a buyer for them. As Russell Brunson says, people are either moving away from pain or towards pleasure.  It’s our job to identify what our future customers are more focused on and what pain they are experiencing and what pleasure they seek.

This week I am going to talk about the top 7 most popular mistakes we can make when buying an investment property.  Peer pressure often forces otherwise logical people to make illogical decisions that are quite common in the real estate space. Sellers, Wholesalers, and Realtors tend to paint an unrealistically rosy picture of how profitable the investment will be. Maybe you don’t want to disappoint those who are pitching you such an amazing deal so you pull the trigger. It might be that you are so excited about the opportunity to own real estate you skim over the deal without completing a full cashflow analysis. Sellers of investment real estate know that you as the newbie do not want to be considered a tire kicker, so you do the deal so as not to disappoint the “cool kids”. Shortly after closing, you find yourself short of cash over the next few months.  You find this odd because after all, you recently bought a rental property, and it’s rented so where are all those profits? I’ll tell you where… Most common cashflow killers that are overlooked or underestimated:   Vacancy Loss: Sellers would have you believe there is no such thing, yet it’s your biggest cash flow killer. Never underestimate this, in fact, insist the seller show a lengthy track record of stable income if they are unable to prove it, assume the worst.  Find more than one experienced property managers and ask them what is reasonable to expect in vacancy loss   Property Management Fees: The amount varies by market area, size of the asset, and the manager’s expectations.  Don’t EVER ignore this expense in favor of self-management...that’s a cashflow killer for sure.   Utilities: “But Tyler, the tenant pays the utilities”:...sure, until they move out.  In many cases, the landlord is paying water, sewer, and trash, sometimes electricity is paid by the owner/landlord.  In the summer, one month of electricity can cost hundreds of dollars because the AC should be kept on to prevent mold build up in humid areas.  The same situation applies in the winter in cold climates, many times the heat (gas or electric) needs to be used to keep pipes from freezing.   Insurance: It is simply not possible to guess what the cost of insurance will be. Just because your house is a similar size to the one you are thinking about buying does not mean that the insurance costs will be similar amounts.  Construction type, area, building material, your credit rating, type of rental (short or long term), all impact the insurance cost.   Overestimating Rent Amounts:  Use multiple data sources to determine what fair market rent should be.  Use classified ads and calls to other landlords who own properties similar to yours, near yours, and ask what they are actually receiving in rent.  Check MLS rental data for rented properties (not vacant properties).  Use Rentometer Pro to get specific to your asset type (house or apartment) Please know that you will not be able to simply raise the rent on day one, regardless of what the seller, Realtor or wholesaler says.   Misjudging rent ready repairs: Get quotes from licensed contractors for work needed before you get locked down.  Never take the word of those who are selling you the property.   Taxes: When a property is purchased, the property tax is often increased to match the purchase price you paid for it if the property was bought for more than the most recent tax value assessment.  Furthermore, if the home was owner-occupied, it’s likely a homestead tax exemption is on the property now which will fall off once title or deed changes hands.  Call the local tax collector and give them the intended purchase price in order to obtain the real cost of taxes once you close.  Don’t be surprised if the taxes increase by thousands of dollars per year.      

When buyers and sellers get nervous, believe it or not, properties get sold!   Here’s how…  Sellers are suddenly accepting lower offers in fear of getting caught short by a market shift.  They are seeing that in some circles, the belief is that fewer people are buying due to fear caused by the pandemic and the massive spike in unemployment.  The uncertainly can keep many potential buyers on the sidelines, waiting to see how things will play out.  On the other side, buyers are in fear of missing out on historically low-interest rates that we will not likely see again for decades, if ever.  FOMO is driving some buyers off the sidelines so they can buy before it gets too expensive for them to buy because of interest rate inflation.  What’s fascinating about this whole situation is that if you remember the 2008 housing crisis, buyers were not panicking, only sellers were.  Because of the imbalance, buyers were able to score great deals due to seller panic. Seller’s back then did not know if they would ever be able to sell their home for a fair price.  That meant properties were sold for pennies on the dollar.  In today’s situation, with both parties panicking more transactions are getting closed despite the looming mortgage crisis.  Listen in to this weeks episode to learn new strategies to prosper in these uncertain times instead of being a victim of it. 

This week I want to talk to you about what will most likely prove to be the most important topic of this year…. Let’s talk about you retiring someday...or not. This means we need to learn a little bit about Social Security and how the system works.  First, Social Security payments come mostly from two primary “trust funds”.  One is called the OASI which stands for Old Age and Survivors Insurance, the other is referred to as “DI” which stands for Disability Insurance.   According to a recent press release provided by the Social Security Administration on April 22nd 2020, both funds will be out of cash in the year 2035. That’s less than 15 years away...which basically means you will NOT be able to retire off social security at ANY age. But Wait...there’s MORE! In the 2020 Annual Report to Congress, the Social Security Fund Trustees announced: The asset reserves of the combined Trust Funds increased by $2.5 billion in 2019 to a total of $2.897 trillion. (that’s good) The total annual cost of the program is projected to exceed total annual income, for the first time since 1982, in 2021, and remain higher throughout the 75-year projection period. As a result, asset reserves are expected to decline during 2021. (that’s bad) Social Security’s cost has exceeded its non-interest income since 2010. (also bad) The year when the combined trust fund reserves are projected to become depleted if Congress does not act before then, is 2035 – the same as last year’s projection. At that time, there would be sufficient income coming in to pay 79 percent of scheduled benefits. Do you trust Congress to “act”? Before you answer that...consider this.... “The projections in this year’s report do not reflect the potential effects of the COVID-19 pandemic on the Social Security program. Given the uncertainty associated with these impacts, the Trustees believe it is not possible to adjust estimates accurately at this time,” said Andrew Saul, Commissioner of Social Security. “The duration and severity of the pandemic will affect the estimates presented in this year’s report and the financial status of the program, particularly in the short term.” Whoa...how about that for a wakeup call.  Now let’s dive into the numbers: Total income, including interest, to the combined OASI and DI Trust Funds, amounted to $1.062 trillion in 2019. Total expenditures from the combined OASI and DI Trust Funds amounted to $1.059 trillion in 2019. Social Security paid benefits of $1.048 trillion in the calendar year 2019. There were about 64 million beneficiaries at the end of the calendar year During 2019, an estimated 178 million people had earnings covered by Social Security and paid payroll taxes The projected actuarial deficit over the 75-year long-range period is 3.21 percent of taxable payroll – higher than the 2.78 percent projected in last year’s report. So remind me again why working as a wage slave for the rest of your life is a solid plan? Who is going to pay you so that you can retire?  Clearly it’s not the Federal Government, heck they admit that themselves in this report. In learning how to write direct response sales copy, some teach to say “it’s not your fault” to win hearts and minds...but I am not here to sell you trinkets, instead I am here to help you to become financially free so that I won’t have to support you later in life. If you are hearing the sound of my voice and think that your government or some stranger on Wall Street or even worse, some slimy insurance agent pitching a “be your own bank” scam is going to allow you to retire it will be your fault that you will work until you die. You must stop messing around hoping someone else will give you money because you “worked for it” in a job for 40 years… Those of us under 60 must build streams of income today in order to SURVIVE.  You cannot live off credit cards and debt, eventually, it will swallow you alive. It’s time to take affirmative action towards protecting yourself from financial ruin.  If you need someone to talk to, book a call with me at CashFlowGuys.com/AskTyler If you are tired of accepting what is happening around as the “New Normal” and missing out on an opportunity that is right in front of you, please visit MailboxMoneyCourse.com and take immediate action towards charting a new course.

This question is on all of our minds lately I bet. it certainly is on my mind.  Everyone keeps mentioning this supposed “New Normal” but what does that mean for real estate investors?  The true meaning depends on your own interpretation of what “normal” is. Let me explain…for me, it’s normal for a seller to accept payments for their equity because I believe it’s the smartest way to sell a property.  Because I believe so deeply in this method of selling real estate I am shocked when someone disagrees. Because I believe seller financing is a normal thing to do, I find it easy to obtain seller financing terms when I buy real estate.  When I sell real estate I always try to sell it on terms for three main reasons: Higher Sales Price because I make it “easy to buy" I receive a predictable stream of income I can reduce my tax liability and spread out what liability I have over time with a tax strategy. (Read Installment Sale IRS Publication 537) New Normal could mean it’s an accepted practice to no longer pay rent. New Normal could mean a shortage of rental housing due to landlords refusing to allow people to live rent-free in their rentals. New Normal could mean skyrocketing rents due to lack of availability of housing. New Normal could mean that good people need a clean, safe affordable place to live (and always will) therefore make a policy to only rent to these people. New Normal does mean that Airbnb is laying off 25% of its workforce globally, but this can also mean that you now have a reason to learn how to be a better marketer and obtain more direct bookings. New Normal does NOT have to be a bad thing.  All of the recent drama will clear much of the smoke from our eyes so hopefully more people will put a priority on gaining financial intelligence, and then financial independence.  It’s about streams of income folks, stop chasing those piles.  Flipping houses is for the uneducated, buy rentals instead when the numbers make sense.  Don’t know how to analyze a deal?  Go to HowToMakeDeals.com for my free course on learning how to do just that.