Cash Flow Guys Podcast

If you are not asking yourself this question each and every time you stop to peek at a shiny investment opportunity you are doing yourself an injustice.  In today’s world, millions of “things” compete for our attention, and investment opportunities are no exception.  I wasted a whole bunch of time chasing each and every lead, regardless of whether or not I thought it would pan out.  This is in part because I failed to ask myself the painful question “How Can I Profit From This?” We are raised to be humble, to not covet material things. We are taught to be selfless, to put the needs of others before ourselves.  I admire the idea of such traits, however if we are not at our best, how can we ever be able to help anyone else?  We must first take care of our own finances, we must ask ourselves that very question each and every time another “deal” grabs our attention. When you discover an opportunity to profit, then ask yourself why else should you focus on this opportunity.  At what risk of time or investment is this profit we seek?  Will it take us a year to make $1,000?  Or will it take us a month to make $100,000?  “What’s in it for me?” is another taboo thought to have, yet this one goes right along with how we can profit from it.  Being selfish isn’t all that bad, instead, think of it as a requirement towards being in a future position to help others selflessly. Always begin with the end in mind, that means that we must first decide on how we will eventually “exit” this opportunity.  By making these plans up front, you are better prepared to manage

What is more important?  Doors or Dollars? This mindset can cause lack of focus on profitability, and when we lose focus, we lose money!  People with lots of doors don’t necessarily have lots of money, there are many investors out there right now focused on building numbers of doors, hoping that as they scale the size of the portfolio, magically profitability will catch up with them.  The old saying goes, “You make money your money when you buy” which is very true. Today’s apartment investor in many cases is more of an apartment “flipper” in many cases.  I know investors with hundreds of units that despite a decent sized portfolio, simply cannot escape the rat race.  This can be for several reasons, however it usually boils down to two reasons. They live above their means by either carrying too much personal debt, squandering cash or irresponsible spending. They don’t earn much profit on their deals and in some cases are actually losing money on their “investments” The good news is that these issues can be avoided by being more choosy and diligent when choosing which opportunities to invest in.  If you choose to speculate in real estate, you will eventually suffer a loss, it is basically not avoidable.  If you choose to invest for cash flow based on solid research and proper due diligence before closing you will indeed prosper. Do you remember the story of the Tortoise and the Hare from when you were a child?  The Hare (aka rabbit) get’s cocky about winning and takes a nap during the “race”.  For an investor this can be compared to overlooking red flags, doing deals just for the acquisition fees, or simply doing deals because you are racing towards a goal tied to a certain number of rental units (or doors).   Be the tortoise, be steady and deliberate in your dealings, remained focused on why you are investing to begin with.            

This week I discuss where you, the aspiring investor fits into the game of investing.  I talk to many people each week who respond to the opportunity to get on a call with me to help them get stuck, many of those calls revolve around people needing direction. You can book a time slot on my calendar here: http://CashFlowGuys.com/AskTyler I remember wondering where I should begin, I also remember how paralyzing this decision was.  Do I do deals alone?  With partners? Should I JV? Do a syndication?  Get a mortgage?  What about hard money loans?  Maybe I should be out driving for dollars, after all, everyone seems to be doing that, wait...should I wholesale first?  All valid questions no doubt! STOP!  Breathe.. Ok, now let’s first focus on thinking about what you are good at.  What skills do you have that would be beneficial in a real estate transaction or company.  Perhaps you come from a construction background, or maybe you are simply good at managing people.  Could you leverage that experience into equity in a deal?  Of course you can! I am really good at closing (sales), raising money and dealing with tough problems to find solutions that benefit all parties.  Therefore, in my organization I primarily raise money and solve the larger and more delicate problems. Do you have a flair for advertising or marketing?  Maybe that’s your role which can help the asset manager find more leads, the money raiser book more appointments to build relationships with investors or to help the property management team find more tenants. Regardless of your skill sets, I bet you can dig deep and find tangible skills to bring to the table.  As you listen to this episode, be listening for specific instructions on how you can begin to assemble your power team.  After all, NONE of us can do this alone. Till next week…. Tyler      

I find it troubling that investors waste countless hours preparing and delivering offers only to have them quickly dismissed or flat out rejected without any feedback on why the rejection was necessary.  Over the years of talking to lots of investors, I learned that those who have a higher ratio of accepted offers share certain traits and practices with their peers who find success in the offer presentation phase.  I know you might be thinking that maybe they just offer more, and that’s simply not the case.  Those who suffer lots of rejection also share similarities that point to their reasons for failure.  Perhaps you think that one main reason those who suffer rejection have this issue is that they simply make more offers.  In part there is truth to that, but the problem runs much deeper. The offer process is certainly a scary thing for many people and with good reason.  Nobody enjoys rejection on any level.  Before you get too wrapped up in the emotion of rejection, first we need to understand that the seller is more nervous than you are! Below are a couple tips to help you through the offer process: Only make offers when you have been able to accurately determine the problem and motivation to sell. Always be working with the decision maker, intermediaries only serve to get in the way and reduce the likelihood of effective communication in most cases To buy creatively, avoid any property listed for sale by a Realtor or Wholesaler unless you can get them onboard with you working with the seller directly.  Never allow an offer to be blindly sent to a seller by your agent.  First gain a verbal acceptance from your conversation with the seller and then ratify the agreement with the written offer.  Please understand that NO is part of the process, and a very important part at that.  Go listen to episode 125 of the podcast for more details on the pendulum theory to better grasp this important concept. If you must work with a Realtor, compensate them well to gain loyalty.  We must put the needs of our team before our own needs to obtain the level of service we seek.  I realize that I also said that Realtors can cause a breakdown in communication, however a quality agent can get you over the finish line if they are skilled at negotiation.

This week I talk about quick and easy no money down deals, in fact I am writing an ebook on this very topic which will be available in the next few weeks.  No money deals are in fact possible, although many folks don’t believe this is the case for them.  Part of the reason many people have difficulty in structuring these type deals is because of the motivation level of the seller.  Unmotivated sellers will resist most creative deal structures, that’s just the facts folks.  I am not saying it is impossible to deal with an unmotivated seller, but it is much more challenging. The second reason most people fail in structuring no money down deals is that they are not direct to the sellers.  If you are forced to work through a gatekeeper determining the seller’s true motivations to sell (if any) is virtually impossible. It's a Realtor’s job to withhold seller motivation details without the seller's prior consent.  Wholesalers might share this info with you, but the sad fact is that many wholesalers do a lackluster job of determining seller motivation to begin with. This episode also covers a few more unique strategies to help you negotiate deals without having to use your own money.  A second episode (part 2) will dive into more strategies that I cover in the book to better prepare you to do more creative deals with less stress and aggravation.

This week I interview Private Money Rockstar Jillian Sidoti who is one of the country's leading experts on Regulation A+. (Regulation A is an exemption from registration for public offerings.) She is also the author of the highly rated book, The Crowdfunding Myth which debunks the multiple myths surrounding crowdfunding and teaches the reader how to effectively crowdfund their securities offering Jillian also spends her time speaking at seminars educating real estate investors on how to legally raise capital for their real estate investment projects. You can reach out to Jillian at PrivateMoneyRockstar.com or CrowdFundingLawyers.net This episode is PACKED with solid gold chunks on how to legally raise money without getting yourself in hot water with State and Federal Regulators.  The reason I asked her to join me was due to a Facebook post she made regarding advertising on Facebook to raise private capital. Lots of investors tend to feel that SEC regulations don’t apply to them, this is for various reasons but often these people are the victims of bad information.  As we all know, on social media, everyone has an opinion it seems.  Sometimes those opinions lead others unknowingly astray from the law.  Below is her post: “Today the SEC came out with this as part of their complaint against a defendant selling private securities: "Respondents did not have pre-existing, substantive relationships with a number of the Fund’s investors and engaged in a general solicitation of public interest in the offering through Fund's website and traditional media interviews." It continues to be unlawful to solicit for investors outside an applicable exemption such as one under Rule 506(c). This means solicitation on FB, FB pages, your website, Linked In, other social media, or standing up in the front of the room at your local REIA and asking "does anyone want to invest?" Ask yourself: "do I really have a pre-existing, substantive relationship with all of my FB friends or all of those in that FB group I just posted to?" Such a relationship is "intimate knowledge of one's financial ability to invest." You can achieve this through an investor qualification form and that is the safest way to achieve such a relationship. I see this type of offense all the time and people always have an excuse as to why the rules don't apply to them...until they do apply to them. By the way, the defendant above raised a total of $567,000 - not millions of dollars. So if you don't think the SEC will care about "little ol' you" you couldn't be more wrong. You are what is referred to as "low hanging fruit." Jillian doesn’t pull any punches here in this post, in fact, during the episode, she mentions that these government agencies are on a mission to collect fines.  In fact, they even go so far as to pay people who bring forth complaints that wind up uncovering illegal activity.  I see people begging for money on Facebook every day, don’t be surprised if these people wind up going to jail or being heavily fined.  Be sure to bring a notepad when listening to this episode because you a guaranteed to learn a ton.        

In this episode I continue my interview with Amanda Young and learn more about how this single soccer mom goes about buying houses after losing her job and while unemployed.  Yes, you read that right, she lost her job, and THEN bought rentals!  Amanda also dives into how she began to attract private money with no prior experience in doing so. Later in the episode; Amanda discusses how adding a partner to the mix (a local realtor friend) she was able to get more deals done in less time and with greater profits.  Amanda loves to buy sinkhole homes for pennies on the dollar after she learned that most people (including me) are scared of them.  Amanda has taken this niche seriously and for doing so, built herself a nice portfolio of rentals. She deep dives into the history and misinformation about buying sinkhole homes and how she has leveraged this knowledge to her advantage as a rehabber.  Amanda has learned to look for problems and uses common sense and patience to orchestrate offers that sellers accept because they are custom to their situation.  Many people think that all sellers want all cash.  While its true that many sellers think they want or need cash the reality is that the sellers often don’t need cash at all, they need what the cash will do for them. I hear many people say that they don’t believe a seller will take payments for their home.  Much of this belief comes from within your own system of beliefs, afterall, how can you predict what a seller needs or wants?  Yes, many sellers may want and insist on all cash, however Amanda is yet another example of an investor who leverages problem solving into seller financed deals.  I bet, if you believed it was possible you could structure seller financed deals, you would own a few seller financed deals.  My beliefs have helped me structured tons of seller financed deals, some with no money down and / or zero interest! I believe these two episodes are some of the best content we have recorded, I hope you take the time to listen to them more than once.

In this two-part episode I sit down face to face in the studio with a local investor Amanda Young.  Amanda has been investing for many years now, beginning as a buy and hold landlord and later including house flipping to her resume.  Amanda believes in getting face to face with the sellers while taking the time out to build rapport with them before trying to buy their house.  In this episode, Amanda breaks down the steps she takes in getting to know the sellers and how she learns about whatever problem they may have that can be solved by the sale of their home. When we focus more on the seller’s problem than we do on the property we build strong relationships with the seller.  Anyone can throw an “all cash” offer at a seller and hope for the best, but those who take time to invest in the seller will yield far greater results.  Amanda outlines how she has been in multiple offer settings and won the bidding as the LOWEST bidder! Sellers that “like” us are far more likely to do business with us.  People generally avoid doing business with people they do not like.  To be liked we need to be good listeners which means applying that 70/30 rule.  This means that 70% of the time we should be listening, and 30% of the time it’s ok to talk; BUT during that time we should be asking questions.  The more we learn about the seller’s situation, the more prepared we are to help them and heal their pain.  Offers that solve problems get accepted, its really that simple.

Unfounded speculation is the most common way that “great deals” become bad ones.  By unfounded I mean that the parties involved failed to thoroughly complete their due diligence.  This happens to both investors and deal sponsors.  Far too many passive investors fail to thoroughly understand the investments they participate in. This episode applies to investors and sponsors.  Investors for the sake of this episode are considered as those who are infusing capital into the deal, Sponsors, on the other hand, are the ones who are sponsoring the deal (have it under contract) Never take the word of the person selling you something as the final truth, instead, learn the investment opportunity until you understand how it will be able to pay you.  What you wind up with matters less than HOW it will come to be.  Don’t allow lofty projections get you all excited, that’s a quick way to the poor house. Not asking enough questions (or the right ones) often leads to disappointment.  I speak with investors all the time who don’t ask very many questions.  Some say that they feel if they ask too many questions they might be dismissed as a newbie.  Don’t become a victim of your own insecurity, ask all the questions you need to be comfortable with the opportunity before you. Want expertise? hire an SEC compliance Attorney to review your documentation and offering.  You can book time on my schedule to submit a deal review if you want a second set of eyes on it. Sponsors, don’t get sucked into the terrible advice of “fake it till you make it”.  Instead, teach what you know, and always keep learning and sharing as you learn.  Sharing with others in the form of teaching is how you develop expertise. Investors..What can the deal afford to pay?; How can the deal afford to pay that?  The answers should be crystal clear, if not..stop and figure that part out. Ask your sponsor what happens if the data or research is incorrect or inaccurate?  How will that be dealt with? Can the sponsor be fired in the event of poor performance? What happens if the sponsor gets sick, dies, whatever, who takes over?  Is Key Man Insurance included for investors? These are just a very short list of questions investors need to ask and sponsors need to be prepared to answer.    

We tend to over complicate everything, that’s the truth!  I was most likely one of the best examples of this phenomenon.  In my defense, I used to work for the government, perhaps that’s where I picked up this bad habit.  To those already started or getting started, please take note of a few tips to help you keep it simple: Don’t buy too many tools.  How many are too many?  If you have not used a tool in the last week or two, you have too many tools.  I learned to find my core group of tools, test each on trials and then pick one for each task grouping and stick with that tool for a year.  I also buy them on the annual plan versus a recurring monthly charge which can save a ton of money. Don’t sign up for more training than you can consume.  Again, I have done this more times than I would like to admit.  I am an info junkie, I love to learn, but, I only have so many hours of the day in which to learn.  For me, this meant promising myself that I would not purchase any additional training until I finished what I already have.  This is challenging to say the least because info marketers are really good at sucking us in with the “doors are closing forever” gimmick, therefore, triggering our Fear of Missing out reflex. Implement what you learn immediately.  Knowledge is NOT power, implementation of knowledge is power.  If you hesitate, you might miss your window so do it now before old man procrastination takes over. Don’t simply follow the herd, the truly successful are the innovators and risk takers.  Think and Act outside the box.  Quite often the most obvious idea is the most overlooked.  The herd is usually somewhat blind to the environment in favor of following the sheep in front of them.  Indians used this to their advantages in the old days to harvest herds of buffalo by literally herding them towards a cliff.  One after one those buffalo blindly jumped to their death. Keep your public facing deal strategy simple.  When working with a seller, whatever solution you propose needs not be complex.  Remember, people fear what they don’t understand.  Also, as the saying goes, the confused mind always says NO! Treat each lead like a dog!  Yep, I just said that!  Think about how you approach a strange dog..first, let them smell you (get to know you), then build rapport.  Go easy or they will either run away, or bite you.