Podcast Summary
Creative Real Estate Investing with Other People's Money: With creativity, anyone can succeed in real estate investing, even with limited funds, through various methods like private money, becoming a lender, or rent-to-retirement options.
With creativity and following simple investing ideas, anyone can achieve success in real estate, even without a lot of money upfront. Mike, today's podcast guest, is a perfect example of this, having done over 100 deals using mostly other people's money. The episode covers various aspects of real estate investing, including private money, finding and using it, and becoming a private money lender if you have cash but don't want to deal with tenants or be a landlord. Additionally, Rent to Retirement offers an intriguing option for buying turnkey rental properties with no money down. Listen to the podcast for more detailed insights from Mike on these topics.
Investing in Real Estate with Little to No Money Down: Explore investor loans, 1031 exchanges, and tools like DealMachine to invest in real estate with minimal upfront costs, build wealth, and minimize risks.
There are various ways to invest in real estate with little to no money down and maximize returns. For instance, investor loans with low rates and down payment options, and 1031 exchanges to defer capital gains taxes, can help build a rental property empire. Tools like DealMachine offer unlimited access to contact information for lead generation and deal making. Remember, always prioritize safety and consult professionals before making significant financial decisions. Mike's story highlights the importance of being a responsible landlord and taking necessary precautions to ensure tenant safety. Overall, these strategies and tools can help investors save money, build wealth, and minimize risks in real estate investing.
Growing up in an entrepreneurial family and reading 'Think and Grow Rich' sparked the speaker's interest in real estate.: Determination and education led the speaker to a successful career in real estate despite early challenges with implementation and finding the right resources.
The speaker's introduction to real estate was influenced by his upbringing in an entrepreneurial family and the influence of books like "Think and Grow Rich." He attempted to start in real estate through a house hacking course but faced challenges with implementation. Eventually, he found success through creative real estate investing and meeting people in local real estate clubs who taught him about wholesaling and other methods for finding motivated sellers. Despite early setbacks, his determination and education led him to a successful career in real estate.
Start learning on the job: Learn enough to take action and don't let fear hold you back. Most learning comes from real-life experiences.
It's important to take action and start learning on the job rather than trying to learn everything beforehand. The speaker shares his personal experience of getting started in real estate investing by taking action, such as buying bandit signs and knocking on doors, even though he didn't know everything at the time. He emphasizes that most learning will come from actually doing and encountering real-life situations. The speaker also advises new investors to learn enough to start taking action and not to let fear hold them back. He shares an example of how he learned about short sales by asking for help online and getting the deal accepted through the process. Overall, the key takeaway is that taking action and learning from real-life experiences is crucial for success in real estate investing.
Personal story of unexpected real estate success with risks: Negotiate with banks, understand market value, consider alternative financing for non-financeable properties, and be creative and adaptable in real estate investing.
Sometimes taking risks in real estate investing can lead to unexpected success, but it's important to be aware of the potential pitfalls and the changing regulatory environment. The speaker shared a personal story of buying a property from a distressed seller, allowing them to stay in the house, and eventually selling it back to them for a profit. This strategy, while successful for the speaker, is not recommended due to current regulations and potential risks. He emphasized the importance of negotiating with banks, understanding market value, and considering alternative financing methods like private money when dealing with non-financeable properties. Ultimately, the speaker's experience taught him the value of creativity and adaptability in real estate investing.
Learning from experienced investors through partnerships: Partnering with investors can lead to valuable insights and successful real estate deals, including taking over debt on mortgages (subject to) with minimal cash.
Partnerships and seeking advice from experienced investors can lead to valuable learning experiences and successful real estate deals. In this case, the speaker had two short sales in a row, both involving multiple mortgages. For the second deal, they partnered with an investor and learned the process of taking over the debt on the first mortgage subject to, allowing them to buy the property with minimal cash. However, it's important to note that such transactions come with risks, including the need to disclose the lack of payoff of the existing loan and the potential for the lender to call the loan due if the title transfers. Overall, the speaker emphasized the importance of learning from experienced investors and the benefits of private money transactions, which can lead to more cash purchases and fewer complex deals.
Mac's Unconventional Real Estate Investing Strategies: Mac has executed over 120 deals using various strategies like wholesaling, seller financing, short sales, and subject to deals, as well as private money lending, which he distinguishes from hard money.
Mac has been successful in real estate investing by utilizing various strategies beyond bank financing. He has done around 120 to 125 deals since his last bank-financed deal, which include wholesaling, seller financing, short sales, and subject to deals. Mac considers himself a "transaction engineer," as he aims to solve sellers' problems and make a profit. He has also used private money, which he distinguishes from hard money, to fund his deals. While hard money comes from professional lenders and has high interest rates and short terms, private money is lent by individuals outside of the lending business, often at lower interest rates and longer terms. Mac finds it easier to secure low-interest private money than high-interest private money, as illustrated by his story of acquiring his first low-interest private lender.
Understanding investor mindset for lower interest rates: Investors with significant capital prefer lower interest rates as desirable returns, and approaching them with confidence and understanding their perspective on risk and return can lead to successful private money deals.
When seeking private money for real estate investments, it's essential to understand the mindset of potential investors. In the speaker's experience, they found that investors who have a significant amount of capital view a lower interest rate as a desirable return, contrary to the common belief that high-risk investments require high-interest rates. The speaker shares a personal story where he was able to refinance a high-interest loan by convincing an investor that a lower interest rate was a reasonable return. This experience taught him that it's important to approach potential investors with confidence and to understand their perspective on risk and return. Smart investors are often looking for stable returns, and a high-interest rate may be perceived as a red flag for potential risks.
Understanding the lender's perspective in private money lending: To secure private money loans for real estate investments, build relationships, show interest in lenders' experience, and recognize your worth as the investor with a solid deal.
When it comes to private money lending for real estate investments, understanding the perspective of the lender is crucial. For those seeking consistent returns with lower risk, private money can be an attractive option. However, high returns often come with higher risk. To find private lenders, it's essential to identify their demographic, such as retired individuals with a real estate background. Building a relationship and showing genuine interest in their experience and advice can help establish trust and increase the likelihood of securing a loan. Additionally, shifting the mindset of the negotiation can be beneficial. Instead of viewing yourself as a borrower, recognize that you have the prize – a good deal and a solid investment opportunity. This perspective can make the negotiation less about convincing the lender and more about finding a mutually beneficial arrangement. Furthermore, Oren Claff's book "Pitch Anything" emphasizes the importance of recognizing that you, as the investor, are the prize. By having a solid deal and understanding your worth, you can approach potential lenders with confidence and effectively communicate the value of your investment opportunity.
Alternatives to Real Estate Investing without Being a Landlord: Consider private lending, check potential borrowers thoroughly, utilize efficient lead generation tools, and partner with trusted companies for optimal returns.
For those looking to invest in real estate but not wanting to be landlords, there are alternatives such as lending private money. However, it's crucial to thoroughly vet both the deal and the person beforehand. This can be done by checking their track record, references, and legal documents. Additionally, DealMachine offers a solution for efficient lead generation with unlimited access to contact information and phone numbers, while Fundrise presents an opportunity for investors to earn high interest rates by providing funding to top real estate investors. Lastly, partnering with a trusted company like BAM Capital can help navigate the challenging investment landscape and deliver maximized returns.
Protecting Your Investment in Private Money Lending: Do thorough research on the property, investor, and team. Verify repair estimates and understand timelines. Check for first mortgage and be aware of other investors. Experience matters but a solid team and good deal can compensate.
As a private money lender, it's crucial to do your own due diligence on the property and the investor to ensure your investment is secure. This includes checking the investor's research, having a real estate agent on your team, verifying the repair estimate from a licensed contractor, and understanding the timeline. Additionally, it's important to know if you have a first mortgage and to be aware of any other investors involved in the deal. Experience of the investor is also a factor, but having a solid team and a good deal can make up for lack of experience. Protecting your investment is key, and understanding the worst-case scenario, such as discounting the property to sell it, is essential. Private lending comes with risks, and stories of investors taking off with funds and unfinished projects serve as reminders of the importance of thorough research and due diligence.
Arrange for draws in private money lending: To ensure progress and quality of work in private money lending, arrange for draws instead of giving all funds upfront. Build relationships and maintain transparency for potential lenders.
When it comes to private money lending, it's important to not give all the funds for a rehab project upfront. Instead, arrange for draws to ensure progress and quality of work. Hard money lenders follow this practice and recommend private money lenders to do the same. Additionally, transparency about credit history can attract potential lenders. As a borrower, ensuring repayment to private lenders is crucial. Building relationships and letting people know about your real estate investing business can lead to potential private lenders. Private money lending should not be advertised directly but subtly discussed in conversations.
Building a relationship first is key to attracting private investors: Establish rapport with potential investors by being a good tenant or buyer, expand network through events, and build trust to secure future investment opportunities.
When it comes to attracting private investors for real estate deals, it's important to not come across as too eager or desperate. Instead, play hard to get and establish a business relationship first. One effective way to do this is by being a good tenant or buyer, making your payments on time and building rapport with your lender or seller. This can lead to future opportunities for private investment. Another strategy is to expand your network by attending events where potential investors may be present, such as landlord associations or charity events. And who knows, you might even find a private lender by selling them a house or by them selling a house to you on a seller-financed transaction. Remember, the key is to be yourself and build trust, as these relationships can lead to valuable investment opportunities in the future.
Private money lending for real estate deals and relationships: Investors can use private money lending to secure funding, build relationships, and enjoy consistent returns. By structuring deals without traditional mortgage payments, both parties can split net profits and avoid cash flow bumps.
Private money lending can be a valuable strategy for real estate investors to secure funding for their deals and build long-term relationships. After the market crash, one investor shifted his focus from flipping houses to buying cash flow properties, using private lender money to purchase small multifamily properties. By structuring deals without a traditional mortgage payment, the investor and lender could split the net profit instead. This approach helped the investor smooth out cash flow bumps and provided the lender with a potentially higher return on investment. Building relationships with multiple private lenders can lead to a consistent source of funding for future deals. However, it's essential to understand the regulations surrounding private money lending and avoid using words like "safe" or "guaranteed" to describe the investment. Overall, private money lending offers an opportunity for secure, consistent returns for both the investor and the lender.
Determining the After Repair Value for Multifamily Properties: Assessing ARV for multifamily properties requires income and expense analysis, possibly consulting professionals, considering investment strategy, and managing cash flow. Use property management software for streamlined property management.
Determining the After Repair Value (ARV) for a multifamily property requires expertise and professional advice due to its complex appraisal methods. For a single-family home, assessing its value can be done through online tools or with the help of a real estate agent. However, for multifamily properties, it's essential to consider income and expenses, and possibly consult a real estate agent or appraiser familiar with multifamily properties. Additionally, when evaluating a property, consider your investment strategy. For cash flow, ensure the property generates enough income after expenses. For flipping, determine the potential profit after all costs. Regarding mortgages, a 15-year loan can save on interest but may impact cash flow negatively. Consider your goals and ability to manage cash flow when deciding between a 15-year and 30-year mortgage. Lastly, managing your own properties can have advantages, but it may require resources and expertise. Using property management software can help streamline the process.
Managing rental properties with Buildium: Using Buildium streamlines rental property management, allowing for efficient processing of applications, automated payment reminders, and late fee collection.
Using a property management software like Buildium can significantly improve the efficiency and effectiveness of managing rental properties. The speaker shared how he used to struggle with late rent payments, tracking late fees, and managing applications before using Buildium. Now, he's able to manage over 30 units with minimal extra time due to the system's automated payment reminders, late fee collection, and application processing. He highly recommends Buildium and emphasizes the importance of continuously learning and improving in real estate. Another key takeaway is the importance of systematizing a business, as discussed in the book "Work the System" by Sam Carpenter. This involves creating systems and processes to run your business smoothly, allowing you to work on it instead of in it. The speaker found this book helpful in making his property management business more efficient.
Taking action and learning on the job: Successful real estate investors prioritize action over education and build trust through transparency and providing value to potential lenders.
Successful real estate investors take action and learn on the job, rather than getting stuck in the education phase. Mike Sumski, a real estate investor and private money lender, emphasized the importance of getting started and checking your work along the way. He shared his experiences as a Seahawks fan and hobbyist, enjoying golf in the summer and outdoor activities like fishing and hunting in the fall. When it comes to private money, Mike advised being transparent and building relationships based on trust. He recommended finding common ground and providing value to potential lenders. To learn more about Mike and his real estate journey, check out his profile on BiggerPockets or visit his blog, mikesumski.com. Remember, the key to success in real estate investing is taking action and learning as you go.
Find the right real estate agent for investment success: Connect with local market experts through BiggerPockets Agent Finder for deal analysis, neighborhood insights, and confident action in real estate investing
Finding the right investor-friendly real estate agent can significantly help you navigate the complex world of real estate investing and bring you closer to financial freedom. With BiggerPockets Agent Finder, you can easily connect with local market experts who can assist you in analyzing potential deals, understanding neighborhoods, and taking confident action. This free resource is available exclusively at biggerpockets.com/deals, and it's an essential step for both new and experienced investors looking to level up their game. Remember, the best investors understand that it's not about timing the market, but rather having a long-term presence in it. The content of the Bigger Pockets podcast, including this episode, is for informational purposes only, and it's crucial to consult with qualified advisors before making any investment decisions. As always, only risk capital you can afford to lose.
