Podcast Summary
Learning from setbacks in real estate investing: Setbacks are a natural part of the learning process, and creativity and persistence can lead to success in real estate investing. Use various financing strategies like hard money, lease options, BRRRR, business lines, partnerships, and more to fund deals with minimal or no money out of pocket.
Real estate investing involves learning from mistakes and continuously improving through experience. The speaker, David Green, shared his personal journey of losing $5,000 on his first deal but learning valuable lessons that led to greater success in subsequent deals. He also emphasized the importance of creativity in financing and mentioned a guest, Shiloh Lundahl, who uses a combination of strategies like hard money, lease options, BRRRR, business lines, partnerships, and more to fund deals with no or minimal money out of pocket. The speaker also highlighted the benefits of being a BiggerPockets Pro member, including access to landlord forms and other resources, and mentioned a guest who would share insights on a book that helped him heal and grow in his investing journey. Overall, the message is that setbacks are a natural part of the learning process, and persistence and creativity can lead to success in real estate investing.
Exploring creative ways to get started in real estate investing with little to no money down: New construction properties with discounted prices and low interest loans, using home equity lines of credit, and 1031 exchanges are strategies for building rental property empires with minimal upfront costs
There are creative ways to get started in real estate investing with little to no money down. Rent to Retirement offers new construction properties at discounted prices and investor loans with low interest rates and even 0% down payment options. Another strategy is using a home equity line of credit to purchase a rental property, as Shiloh did in 2010. Additionally, 1031 exchanges allow investors to defer capital gains taxes while expanding their real estate portfolio. First American Exchange Company is a trusted resource for facilitating these exchanges. By exploring these options, investors can build their rental property empires while minimizing upfront costs.
Starting Real Estate Investing with Little to No Money Down: Persistence and continuous learning are crucial in real estate investing. Buy rental properties with little to no down payment, focus on debt repayment, and gradually increase commercial rents.
Real estate investing can be started with little to no money down through methods like using a home equity line of credit or purchasing a property through an owner-occupied commercial deal. Shiloh shares his experience of buying a rental property with no down payment, then focusing on debt repayment for four years before purchasing a commercial building for his therapy practice. He later returned to real estate investing by flipping houses with his wife, inspired by HGTV and Robert Kiyosaki's books. Shiloh's story demonstrates the importance of persistence and continuous learning in real estate investing. Additionally, he mentions that rent increases in commercial buildings can be determined by gradually raising rents when leases expire and observing the market.
Unexpected personal growth from a financial book: Reading 'Rich Dad Poor Dad' at 21 influenced speaker's life, validated unique thought process, and led to entrepreneurship, highlighting the power of self-reflection, personal growth, and supportive relationships.
Personal growth and self-discovery can come from unexpected places, even something as seemingly mundane as a financial self-help book. For the speaker, reading "Rich Dad Poor Dad" at age 21 subtly influenced their entire life, helping them understand why they didn't fit in as an employee and leading them to entrepreneurship. The book also provided healing by validating their unique thought process and releasing feelings of shame. This experience highlights how our upbringing and experiences shape our entrepreneurial mindset, and how a book can put words to feelings we've always known but couldn't articulate. The speaker's journey also demonstrates the importance of having a supportive network, as evidenced by their partnership with a realtor friend in their real estate deals. This anecdote underscores the power of self-reflection, personal growth, and the impact of influential books and relationships in shaping our futures.
Negotiating the purchase of a note: Being creative and adaptable in real estate investing can lead to profitable opportunities. Negotiating the purchase of a note for less than expected allowed the investor to free up funds for other investments or expenses.
Creativity and flexibility are key in real estate investing. In this story, the investor and his friend bought a property with a carry back note for $40,000, but when the sellers became anxious for their money, they negotiated to buy the note for $30,000. This allowed them to free up funds for other investments or expenses. The investor also shared how he used a home equity line of credit to fund a flip and made a profit, and even bought his dream car, a Prius, with the earnings. Through these experiences, he learned the importance of being creative and adaptable in real estate investing, and now shares this knowledge with others. The investor's ability to think outside the box and make deals work in his favor demonstrates the potential for success in real estate with a resourceful and flexible mindset.
Learning the ropes through creative strategies and partnerships: Successful real estate investing with minimal funds requires creativity, partnerships, and a solid understanding of the market. Beginners should educate themselves and build credibility before diving into deals to avoid costly mistakes.
Creativity and partnerships are key to investing in real estate with little to no money of your own. Shiloh's experience of learning the ropes through various deals, including a loss, highlights the importance of gaining knowledge and working with experienced partners. In one instance, Shiloh and his buddy made a profit of $95,000 each from six flips, demonstrating the potential rewards of creative strategies. However, it's important to note that this success came after building credibility and understanding the real estate market. Beginners should be cautious and educate themselves before diving into deals, as Shiloh learned the hard way when he lost $5,000 on a property with an unpermitted addition. Overall, creativity, partnerships, and knowledge are essential components of successful real estate investing with minimal personal funds.
Thorough due diligence on permits and inspections essential for real estate flipping: Always research permitting requirements and ensure all necessary inspections have been completed before purchasing a property to prevent unexpected costs and delays. In some areas, unpermitted work may be acceptable, but always weigh the risks and potential costs against the benefits of the property and local market conditions.
Permits and inspections are crucial aspects of real estate flipping, but they can sometimes be overlooked or ignored, leading to unexpected costs and delays. In some cases, properties may be sold at auction without proper permits, and buyers may not discover this until after closing. To prevent such issues, it's essential to do thorough due diligence before purchasing a property, including researching permitting requirements and ensuring that all necessary inspections have been completed. However, in some areas, unpermitted work may be common and acceptable, as long as it is safe and does not pose a danger to residents. Ultimately, it's important to weigh the risks and potential costs of dealing with permit issues against the benefits of the property and the local market conditions. And if you do encounter permit issues, never give a city inspector the lockbox code before you get there, and make sure you have enough people around the house to make it difficult for them to move through the property unchecked.
Ensure smoke alarms are connected during purchase and partner with a reliable property management company for vacation homes: Stay flexible and creative in real estate investing, be present at closing to prevent potential issues, simplify vacation home ownership with a property management company, and invest in mental health through BetterHelp
Real estate investing involves unexpected challenges and it's essential to approach it with flexibility and creativity. During the purchasing process of a property, it's crucial to ensure all smoke alarms are connected, and being present at the closing can prevent potential issues. Frustration often arises from unmet expectations, and it's essential to remember that real estate investing is more of an art than a science. Vacation home ownership can come with its own set of challenges, but partnering with a reliable property management company like Vacasa can simplify the experience and increase profitability. Lastly, investing in therapy through BetterHelp can help individuals make time for what matters most and provide mental clarity during the investing journey.
Leveraging 1031 Exchange and Lease Option Strategies: Successfully defer capital gains taxes using 1031 exchange, manage lease options with assistant, keep investment cost under $140k, secure loans at 75% ARV, minimize investment
The 1031 exchange is a valuable tax strategy for investors looking to defer capital gains taxes on the sale of investment properties. With over 30 years of experience, 1031 Pros has successfully facilitated over 20,000 audit-free exchanges. Shiloh, a successful investor, shares his experience of using lease options as an alternative to traditional flips when margins became smaller. He structured his business by hiring an assistant to help manage the time-consuming lease option model. Shiloh's lease option model aims to keep the all-in cost, including purchase price and rehab, at $140,000 or less, which is 75% of the ARV. By doing so, they were able to secure loans at 75% of the ARV and minimize their investment. Overall, the 1031 exchange and lease option strategy are effective tools for investors looking to minimize taxes and maximize returns.
Using a mix of loans and credit to buy and renovate properties: Combining hard money loans, business lines of credit, and personal credit enables acquiring, renovating, and selling properties, while managing risk and maintaining cash flow through long-term mortgages and lease options.
The speaker uses a combination of hard money loans, business lines of credit, and personal credit to buy properties and finance renovations. The credit lines serve as a source of short-term funding, while long-term mortgages from local community banks are used to refinance the properties and pay off the initial loans. The use of lease options for five years allows the tenants to purchase the property, providing a potential source of income and long-term stability for both parties. The speaker emphasizes the importance of building strong relationships with lenders and securing good deals to increase the chances of obtaining favorable loan terms. Overall, this strategy allows the speaker to acquire, renovate, and sell properties while managing risk and maintaining a cash flow.
Lease options help good tenants become homeowners: Lease options enable responsible tenants to eventually buy property, ensuring better property care and potential investment opportunities for landlords.
Lease options provide an opportunity for good tenants who aren't quite ready to buy a home outright to still become homeowners. By qualifying potential renters with background and credit checks, and verifying their income, landlords can ensure that those who enter into a lease option agreement are responsible and capable of eventually purchasing the property. Lease options also benefit the landlord by providing a more invested tenant who takes better care of the property, as they have the potential to become the owner. Additionally, lease options allow landlords to strategically plan for future investments, such as 1031 exchanges, by bundling multiple lease options together. Unlike traditional renting, where tenants may not be as invested in the property's maintenance, lease options create a win-win situation for both parties.
Minimize costs and increase profitability with a creative real estate investing strategy using lease options: By implementing a lease option strategy, investors can offset potential losses from vacancy, capital expenditures, and repairs, collect upfront option fees, and sell properties without the need for a real estate agent, leading to increased net worth and higher profits compared to traditional flipping methods.
Through a creative real estate investing strategy using lease options, it's possible to minimize costs related to vacancy, capital expenditures, and repairs, making the investment more stable and profitable in the short term. By collecting an upfront option fee, investors can offset the potential loss of appreciation if the market experiences significant growth. This strategy, which combines elements of the BRRRR strategy, hard money, business lines of credit, and lease options, can lead to increased net worth and higher profits compared to traditional flipping methods. Additionally, selling a property through a lease option agreement eliminates the need for a real estate agent, resulting in additional savings. This strategy may be particularly effective in markets where significant appreciation is not expected.
Benefits of Lease Options for Sellers and Buyers: Lease options provide sellers potential profit increases, tax savings, and elimination of realtor fees. For buyers, they offer a chance to purchase with minimal upfront costs and no credit check.
Lease options in real estate can offer numerous benefits for both the seller and the buyer. For sellers, it eliminates the need for realtor fees and reduces closing costs, leading to higher potential profits. Moreover, it allows sellers to avoid capital gains taxes if the property is held for over five years. For buyers, it provides an opportunity to purchase a property without the need for a large down payment or a good credit score. However, managing the communication with potential buyers and educating them about lease options can be a challenge. Utilizing informative videos and clear communication can help mitigate this issue. The success of lease options is evident in the speaker's experience, with no move-outs and 100% rent payment in the past year. Overall, lease options offer a win-win solution for both parties involved, with proper education and communication being key factors.
Creating Engaging Educational Videos for Real Estate: Sharing knowledge through videos saves time and builds stronger connections with potential investors or partners. Use a simple and transparent lease option model to increase success rate.
Creating an engaging educational video can be an effective way to attract potential investors or partners in real estate. By sharing your knowledge and expertise through a video, you can save time explaining the same concepts repeatedly and build a stronger connection with those interested in learning from you. This approach can lead to mutually beneficial partnerships where both parties gain knowledge and resources. Another key point discussed was the use of lease options in real estate. To increase the likelihood of a successful lease option, it's essential to set realistic expectations, provide fair pricing, and avoid excessive fees. By following a simple and transparent model, you can create a win-win situation where both parties can learn and grow together. Additionally, focusing on one lease option per property can help ensure a higher success rate.
MoHomes helps tenants repair credit and buy homes: MoHomes offers lease options on affordable homes, connecting tenants with mortgage brokers to purchase after a year, benefiting both parties with lower payments and potentially higher success rates.
MoHomes helps everyday people repair their credit by offering them the opportunity to lease options homes under the medium price point. After living in the property for about a year, MoHomes connects them with mortgage brokers to get their credit in order to purchase the property. This not only benefits the tenants but also MoHomes as well. The monthly payments for the tenants decrease once they become homeowners. Although MoHomes hasn't held properties for the full 5-year lease term yet, they believe their percentage of the tenants who successfully purchase the properties will be much higher than the average. Additionally, MoHomes introduces tenants to mortgage brokers before they move in and follows up regularly to ensure their success. A potential improvement could be requiring tenants to meet with the mortgage broker regularly throughout the lease term. The difference between lease options, lease purchases, and subject tos was also discussed, with MoHomes focusing on lease options and subject tos being a different approach where the tenant keeps their mortgage in place and the investor takes over the property with the mortgage. No experience was shared regarding a lease option agreement.
Longer lease terms with potential buyers as tenants: Investors can benefit from longer lease terms with tenants who may become buyers, as they pay down the mortgage and provide a consistent income stream. Separate lease and option agreements are advised to dodge Dodd-Frank complications. Not all tenants will buy, but aiding them in credit improvement can enhance the probability.
Real estate investors can benefit from longer lease terms with tenants who are also potential buyers, as the tenants pay down the mortgage and provide a steady income stream. Separate lease and option agreements are recommended to avoid Dodd-Frank issues. Not all tenants will exercise their options to buy, but providing them with resources to improve their credit can increase the likelihood. A favorite business book for real estate investors is "Cash Flow Quadrant" by Robert Kiyosaki, which offers insights on building wealth through real estate and other business ventures. Embracing challenges and learning from them, as depicted in "Shoe Dog" about Nike founder Phil Knight, is also essential for growth. Hobbies for investors can include going on dates with family, traveling, and deep sea fishing.
Taking calculated risks with experienced partners: Successful real estate investors take calculated risks with experienced partners, while avoiding untrustworthy ones by thoroughly vetting them through contracts and legal advice.
Successful real estate investors have a different mindset than those who give up or never get started. They are willing to take risks and have a growth mindset, unlike employees who prioritize safety and security. Shiloh shared his personal experience of deep sea fishing, which was a terrifying and risky experience that left him sick and losing faith in the experience. However, in real estate investing, taking calculated risks with experienced partners can lead to success. Shiloh also warned against investing with untrustworthy partners and emphasized the importance of thoroughly vetting them by reading contracts carefully and consulting attorneys. He advised seeking professional help to understand the legal jargon and avoid potential financial losses.
Shiloh Lundahl's Real Estate Journey and Creative Finance Strategies: Improve skills, combine strategies, be persistent, and subscribe to BiggerPockets for success in real estate investing
Shiloh Lundahl, a real estate investor and entrepreneur, shares his journey and creative finance strategies on various platforms including his website blueequities.com, educational videos, parenting classes, and an addiction recovery app. He encourages individuals to improve their skills and combine different strategies to make real estate investing work. Bigger Pockets listeners can find Shiloh's profile there as well. The conversation highlights the importance of creativity, persistence, and self-improvement in real estate investing. Listeners are encouraged to subscribe, leave reviews, and use BiggerPockets Agent Finder to find investor-friendly agents and take their investing game to the next level. Remember, success in real estate investing isn't about timing the market but rather time in the market.
