Having A Tough Time Finding Deals? Go To Right Path

By 2018-11-05Radio Show

RPRE 187 | Finding Deals

 

Many real estate investors have a tough time when it comes to finding deals. As the market becomes competitive, we are often left thinking that maybe everything is just passing by us. There is no need to fear because here at Right Path, you can actually pull the trigger and take action. We provide a number of outlets that allow investors to create a life of abundance – from the bus tour to the contracts and cocktails. We gather around a community of action takers, bringing in appraisers, inspectors, lenders, and insurance guys. Create that momentum of wealth building as you go to Right Path and discover the community that is in there who can help you with your deals.

Listen to the podcast here:

Having A Tough Time Finding Deals? Go To Right Path

We’re going to talk about real estate. We’ve got an exciting event. I know that a lot of real estates investors have a tough time finding deals. With Houston House Buyers, we have been doing buy, fix and flip wholesaling, buy and hold since July of 2013. In that period of time, we’ve done over 500 properties, which is more than anybody that I’ve met in years. That’s from New York to New Jersey outside of hedge funds. For a guy doing real estate, we’ve done a lot. As a result of that, we have generated a lot of stories and things like that. Over and over when people were getting started, what they want to know is how do I find a deal and how do I analyze a deal? How do I value it and make sure it’s a good deal? How do I estimate the rehab and all of those things? In the Right Path, we have a group called Passive Investor Network. They do two main events every single month. The first one is a bus tour. We’re not just going out and going, “Look at all the pretty houses.” It’s, “Let’s go look at these houses and these are for sale.” You could actually pull the trigger, take action. It’s not about just the education. Our mission statement is to help people create a life of abundance by shifting mindsets, implementing proven systems and facilitating a community of action takers. It’s all about taking action.

One of the awesome things that we do, whether it’s the bus tour and even the contracts and cocktails, is the virtual bus tours. What we do is the size of your network determines your net worth. We bring in our network, whether it’s the bus tour or here in the office for the virtual tour. We bring in the contractors, the appraisers, the inspectors, the lenders, the insurance guys. We’ve even got the property manager there. I have three houses in that neighborhood. They rent for this much. The turnover is really low. It’s like, “What do you need to make a decision? How do you create a community of action takers?” You give them all the information they need to overcome the fear.

Give you all the tools and then when you see people in the room with you like, “I want this property,” it’s not like, “I want it too. Let’s bid.” What will happen is we’re going to have twenty properties. That’s the number. I wouldn’t be surprised if we have 25 to 30 fantastic buy and hold properties that are available. What the Passive Investor Network does is we’re the agent representing you, the buyer of the property. If you’re looking for buy and hold deals, you need to become part of the Passive Investor Network. The way that you do that, you can start off by coming to our event, Wealth and Income Workshop. All you need to do is go over to RightPathRealEstate.com and register for the free event. We’re going to have it in our office.

Another thing that’s awesome is not the action taker part but the community part. What I noticed in entrepreneurship, especially when you’re first getting started in real estate and things like that, it can be very lonely. You spend a lot of time running over numbers. You’re spending a lot of time meeting with people you don’t know. As far as building comradery, that can be a very lonely business. When we get together and you get 20, 30 folks in a room, we may have an adult beverage or two, some food but it’s fun. We had a great time and the room was full. It’s nice to be around a bunch of people that are doing what you’re doing and have the same goals. You can have conversations that you can’t have at your normal gatherings. People don’t know what you’re talking about. They think you’re nuts. It’s nice to have that community to go along with it.

It’s important when you can find the people that are tens at what they do. It’s incredible how much momentum you can create in terms of wealth building. Oftentimes, people are working hard but what’s the difference between a guy that’s out there killing it, working hard, making $50,000, $60,000 $70,000, $80,000 even $100,000 a year? Somebody that makes $200,000 a year or somebody that makes $400,000 a year or somebody that makes $500,000 a year, are they actually working harder than the guy that’s making the $80,000 a year? The answer is no.

There are two main differences. One is the thinking that goes on inside the head of the guy that’s making $500,000 a year is different. Number two, the knowledge that the guy has. Number three, the guy that’s making $500,000 a year is different. He’s got better tools for making better decisions. He makes better choices with what to do with his time. It’s not about working harder. I hate the cliché, “Don’t work harder, work smarter.” I hate that cliché because everybody works as hard as they can with the tools that they have. Most people are not working on themselves.

The third thing is their network. They have better quality people. If you’re working, if your network is full of people that are five, six and sevens, if you’ve got a landscaper that is a seven versus a landscaper that is a ten, if you’ve got a property manager that is a five or six or seven versus the property manager that is a ten, if you’ve got a lender that’s a five, six or seven versus a ten, if you’ve got an insurance guy, it makes a difference. How many people struggle with a doctor for example? You want to get in quickly. I needed a quick question from a doctor. I’m going through some underwriting for life insurance. I literally was able to text my physician and say, “When you’ve got about a minute or two free, would you mind giving me a call?” Sure enough 90 minutes later, he calls, “What can I do for you?” People that are more successful, what you find is they can do in shorter periods of time what sometimes take people a week, two weeks, three weeks based on relationship.

You probably talked about this once before when we first put together our mission statement. We did that the four of us in less than two hours, which I was pretty impressed.

When we first started talking about putting together a mission statement, I thought, “We’re going to need to work on that an hour or two a day for three or four days a week for three or four weeks. When we put our mind and focused, we got the right people in the room, the right network, how long did it actually take?

It took us less than two hours, a phone call and a couple of text messages to somebody that we all rely on heavily. It’s so amazing what you can do when you know the right people. They come to your mind immediately because you know they’re a ten at what they do. You’re not like, “Who can I call? What do I do?” You already know because you’ve given value to that person. They are giving value back to you and they’re happy to do it.

Tell us more about Cocktails and Contracts.

Cocktails and Contracts, we’ve got the guys in the pen. I call it the pen pit. They’re making deals and making things happen with wholesalers, MLS deals, off-market deals, pocket listings. They’re professionals. They’re tens in what they do. They find these deals and they find the ones that that work for what our members are trying to do to create the life of abundance that they’re trying to create. What we do is we get everybody in a room and we virtually tour every property. It’s not like, “Here’s the address. Who wants it?” No. We go into the details. What are the repairs needed? We look at the pictures, we talk about it as a group. Everybody’s on the same page. We run the comps as a group. We get the inspector to say what he sees in the pictures, “That’s not a problem. That’s fine.” We get the property managers to give us his numbers. The insurance guy is going to give you a quote right there. We get all that information literally right there. It’s in our spreadsheet. You know what your cash on cash return’s going to be. We even break it out to five years. What does this thing look like in five years?

We can even look at historical appreciation and things like that. The data that we have from looking and analyzing, we help you analyze these deals for you. We help you analyze them like we would analyze them for ourselves.

Success is not just about the goal being achieved, it's about the journey to get there. Click To Tweet

Here’s another thing. What people don’t realize is the sheer amount of deals that we’re doing not just on the Houston House Buyers side but that everybody that’s involved. We’re getting knowledge of the market that other people don’t have. We know that there are certain neighborhoods that appraisals are coming back super high end. We can leverage information like that to get people in and out of deals with less money out of pocket, to get people in the right situations, to get higher than normal market.

Why would somebody want less money out of pocket on a deal?

The short answer to that is cash is finite. You have a limited amount of cash. How can you get into as many deals as possible?

It’s bigger than that. Here’s the thing that people don’t realize when you buy a house for $150,000. If I said, “Daniel, if you want to put your money and get an investment, you want to stick it in a CD. I’ve got one bank that’s paying 7% and another bank paying 14%, which do you want?” 14%. If I buy a house for $150,000 and it appreciates 7%, then I’ve made 7%. If I only have to put 50% down and I put $75,000 in, I borrowed the other $75,000 and it goes up 7%, it’s the same 7% on the $150,000 but I’m at 14% on my money. It gets even better if I only put a third down, then it goes to 21%. If I put a fourth down, it is legal. Do you realize you can buy a piece of property? You can put 20% down and you can borrow the other 80%. That’s four parts one side, one part the other.

For those of who don’t remember fractions, percentages, and decimals, you’re leveraged five to one. That means that if you get $10,500 of appreciation, which is 7% on $150,000, you only have $30,000 in the deal. If you take $10,500 divided by $30,000, you’re at 35% appreciation. If I said, “Daniel, do you want to make 7% of your money or 35% on your money?” What would you say? How much harder do I have to work to get that property to make 7% versus 35%? When you start understanding how the wealthy make money, it’s not about working harder. It’s the same process.

Same paperwork, same property manager.

Let’s say you had $150,000 in a 401(k), IRA or in savings or whatever it is. If you had $150,000, you could buy one house with that and have it go up 7% and make $10,500 on your $150,000. That’s not bad. That 7% is okay. You can take that $150,000 divided up into five chunks of $30,000, go buy you $550,000 houses. You actually have $750,000 of real estate going up 7%. You’ve grown your net worth not $10,500. You’ve grown your net worth $52,500 on that same $150,000 in one year.

RPRE 187 | Finding Deals

Finding Deals: People that are more successful can do in shorter periods of time what sometimes can take other people a week.

 

People spend their whole working adult lives to create that situation.

Do you realize that is right at or above the median income of the average Houstonian?

Which is right around $60,000 and that’s the household income. That’s not per person.

That’s why you want to minimize the amount of money that you have in the deal. It’s called leverage. It’s one of the best things about wealth creation. People that understand this are called wealthy. People that don’t understand this are called middle-class or poor. This is the thing that I wish our educational system would teach instead of, “Romeo, Romeo, wherefore art thou Romeo?” We don’t understand what leverage financing is. I’m a huge Dave Ramsey fan but you have to understand there’s a difference between consumer debt and business debt. I asked someone one time, “Would you ever want to owe $1 billion?” You ask the average person when their mindset is what I’ll call the conventional wisdom mindset, “Would you ever want to owe $1 billion?” Most people think, “How do you even pay the interest on $1 billion?” You think outside the box and you say, “If I could go buy $2 billion worth of assets for $1 billion but I had to borrow the $1 billion to buy that,” you would and then sell the $2 billion in assets, pay off the $1 billion in debt and you’re left with a billion.

I can’t remember who I was talking to, but they were complaining about taxes. I said, “I cannot wait to pay $1 million in taxes.” They’re like, “What? Do you realize what that means for me if I pay $1 million in income tax?”

You’re making $2 million, $3 million or more. Once a month we do a case study. Tell us about a case study, what is that?

Fear is false expectations appearing real. Click To Tweet

We like to celebrate success. It’s not just about the goal being achieved, it’s about the journey to get there. That’s what a lot of people lose sight of. You got to love not just the end goal but the process. We love the process, we love to celebrate people that enjoy the process and have those successes. Once a month, we take somebody who’s doing great. We’re not pulling somebody from several years ago or telling stories about one time because we know people do that. We like to pull whoever’s on fire. We have a lot of students doing a lot. We pull a student out, we don’t force them to do it, but we like to try to help them get out of their shell. We get on stage and we tell their story.

They’re real people like you.

People that are right where you are, in the same spot that most of us are before we get exposed to the other side of the curtain in this business. It’s great to see those people go from literally knowing nothing about real estate to, “I did six deals in 30 days.” Whatever the case study may be, it’s so exciting for us. When you see the process, when you see somebody make that first step, the fear is gone. You put them out there and it’s like, “I want that one.”

I love the acronym for FEAR, False Expectations Appearing Real. Most people, their fear of taking action, when they finally take action, they look back and they go, “What was I so afraid of? That was so much easier than I thought that it was going to be.” How many times in life do you look back and you go, “I created this entire mountain of obstacles that stood in my way. I’ve taken action. Why didn’t I do this a year ago, five years ago, ten years ago?” To create mountains of success, instead of mountains of obstacles and fear.

Right Path is about taking action. It’s to help people create a life of abundance by shifting mindsets, implementing proven systems and facilitating a community of action takers. We talked about leverage. We talked about Cocktails and Contracts. We talked about how someone would get started. We talked about our mission statement, which is to help people create a life of abundance by shifting mindsets, implementing proven systems and facilitating a community of action takers. The goal of education is not knowledge. It’s action. You’ve got to take action.

I hate that saying that knowledge is power. No, it’s not. You can read every book and you can understand every subject but if you’re not doing anything, none of that matters. It’s wasted knowledge.

I knew so many college professors that had so much knowledge on their subject matter, whether it was economics, chemistry, whatever it was but they did so little with their knowledge. They had so much potential action taking available to them and they lived in limitations of their own thinking. I would say that they were living a fear-based life. That’s not the type of life that I want to live. It’s not the type of life that most people that hang around me want to live. If people started hanging around me and they do have that thinking, they either don’t hang around for long or they shift their thinking. It’s a little bit like oil and vinegar. You can’t hang around like that for very long. It won’t be a lot of fun hanging out if you’re not a person who wants to take action. I’m like, “Let’s go do this.” You’re like, “I’m not ready to do that yet.” I’m like, “I’m going to go do this and you can stay where you’re going to be.” When I’m ready to go on vacation and I say, “Do you want to come?” You’re like, “I don’t have the money to.” If you had taken action, you could have come with me and we could hang out some more.

RPRE 187 | Finding Deals

Finding Deals: Leverage financing is one of the best things about wealth creation.

 

The same way you didn’t go with me when I went to take action. You’re not going with me when I go on vacation, the same thing.

Go to Facebook.com and all you have to do is look up Right Path Real Estate. Under that, you’ll see a little green RP in a black box. That’s us. Like us on that page. If you would share on your Facebook page then that will go out to your friends, family, people and then they can learn about us as well. I’ll ask each one of you all to not only like us but also give us as a gift.

We’ve got a lot of excitement going on around. It’s not just what we’ve got going on with the members. We’ve got so much going on behind the scenes. I’m excited because of the things that we’ve got going on and I know where it’s headed. I can see the picture and everybody behind the scenes, the pen guys and you and me all across the board. We are grinding it out and what we’re doing change so many lives.

There’re probably some people that go, “I have a tough time sleeping.” It’s because they’re worried about their future. They’re worried about retirement. They’re worried about what next year’s going to look like. They’re worried about these things but it’s totally different when you can’t sleep because you’re so excited.

If you are having trouble sleeping because you’ve made some bad choices. Not even made bad choices but made the right choices and still aren’t getting where you want to go, come work with us. Let us show you how to wake up in the morning, excited about what’s going on.

If you’ve been earning 10% rates of return on your investments and you want to learn how to make 14%, 21%, 28%, 35% rates of return or even more.

The goal of education is not knowledge; it's action. Click To Tweet

Here’s the scary part. The numbers are so amazing that you almost feel like you’re not allowed to say them. When he’s talking 35% returns, that’s simply on the appreciation that we’re realizing in this market. You’re not counting cashflow. You’re not counting tax benefits. You’re not counting rent increases, rent appreciation. There’re so many different ways to make money. That 35% is one of the ways that you make money in real estate on a property.

We had a guy who came to our free event and he’s already actively involved. He’s been taking action and he wants to follow this one particular methodology. It’s being taught around the country. The reason why they teach it there, it’s not based on the best interest of the person that’s doing it, the investor but he was like, “Why are you against doing this one strategy?” I said, “Let’s just do the math.” We break it out on paper. Let’s say you started with $5 million and I said, “Not that you needed $5 million to start but let’s say that through leverage, you had $5 million worth of real estate. In 30 years with the methodology that we teach, that $5 million of real estate is going to be $15 million or $20 million worth of real estate.” This other strategy that this guy was talking about doing, that $5 million worth of real estate becomes zero in 30 years and you’re like, “Why are we even having this discussion?”

At first, he tried to argue because he said, “It’s not going to be zero because I’ll have gotten that cashflow along the way.” You get the cashflow both ways and it’s about the same.

The cashflow is about the same and I’m like, “Why are we even having this discussion?”

Here’s the thing, somebody taught him that.

Somebody who is not actually doing it.

People said, “Why would they teach it?” What people don’t realize is when you’re trying to sell somebody something, you’re going to make it seem as easy and then the least amount of resistance as possible. When people talk about seller financing or things like that, anybody can do it. Subject to wraps, that whole thing, does it work? It’s a one-off thing. Every now and then it’s something you do but it’s not something you could scale and build a business out of.

RPRE 187 | Finding Deals

Finding Deals: You’re the average of the five people that you hang around with the most.

 

We’re closing one that is a seller finance deal. It’s a unique set up, we’re flipping a house and we borrowed money from a private money lender in order to fund the deal and all that. We have a retail buyer that wouldn’t normally qualify for a traditional bank loan. He owns a bunch of Mexican restaurants and things like that. A lot of times business owners, because they’re self-employed, their tax situation is a little bit complicated. They don’t look great on paper. This guy wants to put $150,000 down on the house and then he wants to finance the rest over five years. What we did instead is an adjustable rate mortgage.

You can’t do balloon mortgages anymore. We want to do Dodd-Frank compliance. I don’t want to get too deep in the weeds, but we used a Registered Mortgage Loan Originator, RMLO. Somebody specializes in and doing the paperwork and all that. We originated properly but that’s not every deal that we do. That was going to be a traditional flip. It’s a $360,000 house. That’s not a buy and hold type of property for us. For a lot of different reasons, you want to learn all the details of why a house like that doesn’t make a good buy and hold. You start by coming to our free event.

That’s one of the biggest challenges. I have that conversation more than any other conversation I have with anybody in this business. When to do what with a property.

We covered that in our weekend event.

We cover it extensively because it’s very important. A lot of people can’t figure out why they’re failing in this business is because they’re not operating in the right circles. They’re trying to fix and flip in the wrong price range. They’re trying to buy and hold in the wrong price range.

Like the guy that came to our event. He said, “I’ve been trying to flip $120,000 houses.” In other words, “I’m trying to buy them for $50,000. I want to put $30,000 in them and then I want to sell it for $120,000 and make $40,000.” I said, “First off, you won’t make $40,000 on that deal if you’re doing your math correctly.” He didn’t understand that and the light bulb goes off and he’s like, “A-ha.” He goes, “I’ve done three or four of these and I thought I would have had $160,000 and I have $20,000.” He understands why and he said, “These are much harder deals to get than what I thought. I didn’t know why.”

You can read every book and understand every subject, but if you're not doing anything, none of that matters. Click To Tweet

What I like to do is step back and I see the different students that didn’t know each other before they came in. You see these relationships that have formed over or starting to form. I love seeing that stuff because we’re a family here. Everybody has a relationship with me and everybody has a relationship with Tom. Scott and Mike talk a lot. Aaron and Blake, you see all these different things and I like that. It fires me up. It makes me feel like what we’re doing is the right thing and it puts me in a good place.

A sense of community is important. They say that you’re the average of the five people that you hang around with the most. We start seeing people making new connections with quality individuals that want to live life at the next level when you have likeminded people that are taking action.

There are going to be lifelong friendships and relationships that come from what we’ve started.

Which is amazing, that’s what people get when they come here. It’s not what the reason why they come here but people come here because they want to learn the recipe and the formula. The ingredients in the recipe like you would want to learn from a baker, the recipe and the ingredients for baking a cake. That’s the reason why people come to Right Path. What they get is a community. What you learn by taking action, you look back and go, “I was so in my head creating all of these obstacles for why I shouldn’t take action.” When people become part of Right Path, they may not consciously know it, but they realize, “I didn’t realize that that’s what I was looking for. I thought I was looking for this but what I was looking for was this.” If you want to find out more about all of that, you’re going to have to experience it. The best way to start is to come to our free event. The best way to do that is to go to RightPathRealEstate.com. People will be taking action if you’re a part of that, fantastic. We’ll see you.

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