Cash Flow Guys Podcast

In this episode, I announce the release of my new book “The Quick and Easy No Money Down Deal Secrets”.  I wrote this book to help investors by having a quick reading resource designed to help them negotiate better deals and more deals without having to invest their own cash into the deal. In this book, some of the ideas I assure you have never before been put into print by any Real Estate author.  The fastest way to grab a FREE copy is to visit NoMoneyDownBook.com today and download a copy.  You also have an opportunity to grab the audio version as well as a once in a lifetime amazing offer from me which is guaranteed to help you supercharge your investment property portfolio (if you apply what I teach).

In this episode, I cover the number one reason you will fail as a real estate investor.  Its the one thing that the majority of people trying to make a dollar as an investor overlook. I’ll give you a hint.. Today I was reading a great book written by legendary copywriter Ray Edwards.  The name of the book is “How To Write Copy That Sells”. In the book he shares a quote from an unknown author that read: “He who has a thing to sell... and goes and whispers in a well is not so apt to get the dollars.. as he who climbs a tree and hollers - Author Unknown Read it twice, or maybe even three times.  The question you have to ask yourself is what’s stopping you from overcoming the number one reason you will fail? In this episode, I provide not only the answer to this burning question but the solution to the problem.

This week I discuss a few things to help you shift your mindset towards getting more deals done.  First, understand that everything is overpriced and always will be.  What someone “wants” when selling something simply does not matter, what matters is the buyer's perception of the value. PLEASE understand that there is no such thing as an advertised “good deal”, now that we have that out of the way, perhaps you can stop “looking for a deal” since we are clear that you will never “find” a deal.  Deals are created by buyers and sellers sitting down to have a great conversation. Stop searching “what’s for sale” aka the “low hanging fruit” expecting a deal to be sitting there ready for the taking.  Instead, focus on finding problems for which your offers can then provide a solution.  If you are trying to get a deal on a property or situation where there is no problem I have two words for you.. Good Luck Always be sure to first determine the Seller’s motivation.  Unmotivated sellers should not be entertained by spending time with us.  An unmotivated seller is usually looking for a retail buyer to pay top dollar and is rarely open to any sort of creative acquisition. Listen in to hear some of the best questions to ask a seller during the fact-finding and negotiations phase.    

A popular line of questioning I get from people who are just getting started involves being cheated out of a deal by unscrupulous people.  In this case, the question was from someone getting stared as a wholesaler who had concerns about a potential buyer cutting them out of a deal to save from having to pay them an assignment fee. In the episode, I explain important steps you should follow which virtually eliminate any chance of this happening to you.  I’ll give you a hint, it all starts with WHO you choose to do business with. The second part of the episode involved answering the question of why a buyer or wholesaler needs to know what the seller plans to do with the proceeds.  For some, this can seem invasive yet how the question is perceived totally depends on how it is delivered.  What I mean is that when you frame the question by explaining how you as a buyer or wholesaler can solve problems, sellers are less likely to be offended by the question once they understand why you are asking it in the first place.  When a seller knows you are actually there to help them, the game changes.  Listen to the episode for a full explanation of what I mean by this and how you can leverage methods like this to do more deals.

When wholesalers or investor buyers write an offer or enter into a purchase agreement or contract with a seller, they often build themselves “outs” or escape clauses into the contract.  These clauses allow them to break the contract without penalty, and often without having to provide a specific reason. Sellers on the other hand, usually are not afforded the same ability, nor are they aware that they too could ask for an out. In many real estate transactions, the sellers are not very experienced in the business of real estate buying or selling.  Sometimes they have inherited a property having never owned one before, or maybe depended on a spouse, family member or Realtor to handle all the details when they bought the property originally.  Also, those who choose to sell their property at a significant discount often have a compelling need to sell. There are occasions where a Seller changes his or her mind about the decision to sell, even after entering into a purchase and sale arrangement with a specific buyer. Sometimes when this happens, wholesalers will record a Memorandum of Contract (or Understanding) with the local court clerk, therefore, clouding a title to a property making it unable to be sold.  In many cases, this forces the seller to sell to that buyer or pay a ransom in order for the cloud to be removed from their title. I find situations like this to be unfortunate and discouraging, to say the least.. What this tells me is that the buyer and seller really never achieved a meeting of the minds, it tells me that the seller was not really “sold” on the buyer’s offer but agreed to it anyway. It also tells me that perhaps there was a drastic change in the seller’s situation that the wholesaler does not know about.  In this episode, I review strategies to help prevent this situation from happening to you.

Who are You Really Working With?  This is a question I think anyone should ask before they write any checks to anyone. Lately, there has been quite a bit of rumbling in the background as some “deals” are not progressing as intended for some folks.  (Big Shocker) Some “popular” investment sponsors are being called to the carpet for investments gone wrong. Lots of operators feeling pressured to do deals, just to do a deal and get money working.  This is no one's fault but their own. It's not worth losing money to invest in a deal that cannot prove itself, by that I mean the deal must support itself.  You should understand all of the elements of the specific deal, most importantly, HOW it will produce revenue backed up by factual data to support the theory. You should know each potential failure point and the remedy the sponsor has in place for that.  If you are the sponsor you should have people on your team to help you arrive at a list of solutions based on the data you have in front of you. In value ad opportunities, the method and means to add the value must be clear, data should support the deal sponsor's plans.  If the sponsor can’t prove where the returns are coming from with verifiable data, DON’T do the deal! Watch out for wacky title search costs, due diligence fees, and acquisition fees.  Everyone needs to eat, but only after everyone at the table has been served.  This means that the sponsor’s payday needs to come AFTER the investor’s returns are determined and distribution has begun.  If the deal can’t afford both then the sponsor needs to suck it up since they were the ones controlling the deal (that’s the right thing to do). You should know the flow...where your money is, how specifically it is being spent.  Don’t get sucked into the hype of urgency to do a deal, far too many sponsors are in a major rush to get deals closed.  When you are rushed, you will make mistakes, this I guarantee you. Is there collateral in the deal you are about to invest in?  Or is this an unsecured loan or investment?  You should know the answer to this and frankly, I would avoid any situation where there is no valuable collateral for you to levy in the event the deal goes sideways. Does this investment need to be registered with the Securities Exchange Commission? You should know the answer to this even if you are the one writing checks.  If the deal structure does fall under the SEC requirements and there is no proper structure in place as WHY.  Those who tend to walk the line of the law and look for ways around it are also the ones most likely to take unnecessary risks with your money.

In this week’s episode I respond to another listener question who had previously booked time on my calendar.  Here is what he said: (edited for privacy) Hi Tyler - We spoke a couple of months ago. I have some units in TX that aren't cash flowing that well and I have a 4plex in Ohio that wasn't going well. I wanted to let you know that your talk really helped - I have turned around the Ohio property - new tenants and will start cash flowing this month. I am also set to close on 7 more units in the area - this is a deal I created - talking the owner down from 280k to 205k and I can push some rents as well. I continue to struggle with the Texas properties. I looked into commercial loans from a few institutions and they all told me I am too small (about 1.1 million in total loans). I can't add storage units to 2 of the properties due to lack of space. On the bright side, it looks like my units are worth about 30% more than when I purchased them between 3 and 12 months ago. Pushing the rents is the only way I'll make cash flow - I've pushed the rents up 15% in a year and I project another 10% in the next 12 months. I won’t give away all the goodies that I spelled out in the episode but I will say that there is almost always a way to make a deal better for you in regards to cash flow.  Think about how you can add value to the tenant and make a better experience for them.  Understand that if you provide the value they seek, you can monetize these things and improve your cash flow accordingly.  The rest of the details can be learned by taking a listen to the episode. Need help getting unstuck?  Go to CashFlowGuys.com/BookTyler to schedule a call with me to help you grow as an investor or get unstuck.    

During this week’s episode I answer questions sent in by Lashonne from NYC.  She asked:   Hi Tyler, “I love listening to your podcast while I’m at work. I’m a newbie looking for advice on my first deal. I know that I want it to be a multi family and due to my location (NYC) it would have to be out of state for economic reasons. So, I’m currently looking into NJ. I know it has some of the nations highest taxes, but cash on cash return outweighs that concern.” My Response: I partially disagree, I believe that if your focus is on discovery of problems and solving of problems that opportunity can be found in any market or market cycle.   She went on to add: “Here is where I need your expertise. I see so many investors purchasing NJ duplexes/triplexes for about $250k +, putting about $50-75k (or more if it’s a complete gut) into it, then renting out each unit for about $1500. Refinance and repeat (BRRR). Is it wise to have 5 or more homes with such high mortgages? They told me that their end game is not to hold on to those properties for the length of the mortgage, but to keep them for a few years and eventually sell them to have enough capital to purchase apartment buildings. My concern with this is having 5 mortgages at $300k a piece! Even if tenants are paying isn’t that too much? Or maybe I’m overly concerned and because of their exit strategy it works.”   My Response: That rarely happens in the real world, this is because they are overpaying in the first place, thus have little to no equity remaining.  Hoping the market will build them equity without any input from them as the owner is a slippery slope unless you have a big bank roll backing you.  That said, its critical to have the properties quickly stabilized and performing in order to realize that appreciation that because the appreciation in a multi family is very closely tied to the income it generates.   She also said: Another school of thought is to purchase duplexes for $100k (not THE most desirable neighborhoods, but okay and definitely not war zones.) The cash flow is not as high as the option above but it still makes a decent amount.   My Response: This statement kinda sounds like you might be willing to “settle” for what is perceived to be the low hanging fruit.  I assure you that this is not the low hanging fruit you may be looking for.  Appreciation and cash flow both tie to location and value, that said, avoid anything that could be viewed by the majority as undesirable. Above is a brief excerpt of what I covered in the episode itself.   If you need help getting on stuck, please book time on my calendar at http://CashFlowGuys.com/AskTyler or visit my website and click on the “Ask Tyler” button on my homepage.