Deadly Mistakes Cash Investors Make – How To Invest Safely – Real Estate Investing

Joe: Hey, it’s Joe again. We’ve been talking
a lot about how to analyze deals. We’ve been talking about specific deals and specific
questions that I’ve gotten from you guys. And what I thought might make a little more
sense than going into more deals that are sent to me specifically from you guys (because
I’ve gotten so many of them and I appreciate you sending them) is to let me go through
a series of videos that show you what does make sense. Rather than saying, ‘Does this
make sense?’ let’s show what does make sense; what is possible.
Joe: And then, you can extrapolate from there – does my deal fit into what makes sense?
And why do these make sense? These next few videos that I’m going to show you are going
to be the different types of deals that you can make money with. And remember, it always
goes back to those two things that I tell you about all the time: there’s only two types
of deals that are going to make you money. One is properties that you can dramatically
under market value for cash. The other is properties that you can buy at market value
or below that you can buy on terms. With either one of those ways, you can almost always make
money as an investor. And you can do it different ways.
Joe: Let’s start though, with cash deals. Properties that you can buy dramatically under
market value – dramatically under market value is one of those variable sort of numbers.
5 years ago, 20% under market value was considered dramatically under market value, especially
in some markets that were shooting up 40% or 50% a year in value. If you could buy something
20% under market value currently and knew that it was going to up another 50% the following
year because the market was going so crazy, that could be a pretty interesting deal.
Joe: By the way, that’s how I started in real estate investing – I bought a property at
market value. It was being built. It took 4 months to build it and by the time it was
built it had gone up 20% in value. And I’m thinking, ‘Wow, this is cool.’ And this was
in 1986 when the market was going crazy. Don’t do that, by the way – don’t buy properties
based on appreciation. That was a stupid thing to do. I was just lucky – I got in at the
right time at the right place and I didn’t lose money; I started making money immediately.
Joe: A lot of you, your first experience in real estate investing is where you lose money,
and that’s a shame – because it usually knocks you out of the game and it keeps you from
doing it again. I was lucky. I got a taste of it and I started thinking, ‘Well, what
if I actually bought a property UNDER market value?’ What a light bulb that was! So I started
buying properties from HUD and from VA foreclosures, and I’d fix them up and then we’d turn around
and sell them, plus they had the appreciation that was going on in the market nationally
at that time. And I was able to buy properties at 15-20% under market value and that would
be considered dramatically under market value at that time.
Joe: Right now in this market environment, 20% under market value is not dramatic. You’re
seeing properties all the time at 30-50% under market value. And I’m talking about real market
value, not somebody’s perceived idea of what the real value is. Because a lot of people
will tell you, ‘Oh, that property is worth $500,000 when it’s worth $250,000 because
that’s what it was worth 3 or 4 years ago, so don’t necessarily believe the values that
you’re told. And even if you do comps, don’t necessarily believe that those values are
accurate, either. I honestly don’t know the value of some of my properties simply because
the area is so variable – there are so many different comps in the same area that are
for identical properties so how do you really extrapolate from that? What you do is hold
onto those properties and let the market stabilize itself which will happen over the next 3-5
years. So always have exit strategies that give you multiple options, especially if you’re
buying for cash. Joe: When I say cash, I’m talking about either
cash or going out and getting a new loan. Cash and credit – they’re both commodities
that you have personally that you expend, and once you use them up, they’re gone. So
you want to make sure that you do it properly if you’re going to buy it this way. So if
you have cash that you’re going to invest or you have a certain amount of loans that
you’re going to go out and get, then you want to make sure that you have a good exit strategy
so that you can do it again. Joe: With me, if I’m buying properties out
of my retirement account, I want to buy properties that I can keep for the long term but I also
want to have a secondary exit strategy in mind where I can go and sell them to investors
and then I can take a chunk profit off of selling that property. If I can’t get it sold,
I’m still going to keep that property for the long term and hold it. I have the belief
that I don’t sell any property to investors that I wouldn’t personally buy myself. The
way I’m doing it right now is I’m buying the properties, doing a little bit of rehab to
them, raising the price, selling to an investor, and still getting that investor 15-18% return
on their investment – if you want to buy one of those properties, let me know and I’ll
sell you one. Joe: But, you can do it yourself and you can
probably make 25% return on the same type of properties – you just have to have the
right infrastructure in place to be able to find the right property. They’re not always
easy to find, for as much as you might think that they’re everywhere out there. The properties
that we’re buying or that I’m buying personally, with a lot of them, are bought through the
MLS, they’re real estate owned; they’re foreclosure properties. We buy them the day they come
on the market. We usually make a full priced offer the day they come on the market. And
they’re usually getting 5 or 6 offers that same day.
Joe: We’ve narrowed it down to certain areas that we’re buying into where we know that
it’s going to be easy to rent and where we know it’s going to be easy to fix up, so we’re
very specific about the criteria that we use, and I’ve got somebody who’s very good at helping
me find those properties. She goes to and looks at them and then when she finds them,
I go out and I confirm, ‘Let’s go ahead and make this offer on them.’ We make the offer
and we get them closed. She goes in and has them repaired, manages the property, and fills
them up. She makes money that way, I make money on the long term investment property
or I turn around and sell them to investors and then just tack on 10 grand to the deal,
so that they still have a good return on their investment, but I made it worth my while as
well. Joe: So if you want to buy those kind of properties,
I’d be happy to sell them to you. If you want to find them yourself, and if you’re in my
mentor program, I’ll be happy to talk to you about different places that you can do that,
depending on where you’re located that might be geographically desirable to do those kinds
of properties with. Because if you’re paying cash for property, the beauty of doing it
the way I’m doing it is that they’re very cheap, they’re very easy to get into, and
they’re very easy to sell to other investors. Joe: There’s a lot of investors out there
how have $25,000-$50,000 to invest, but there’s a lot fewer investors out there that have
$100,000 to invest or $200,000 to invest, and they’re still out there and I’m still
finding them. I’m selling multiple properties to these people. But if they have to keep
those properties, then their return on their investment is going to be much lower because
with a $100,000 property, it’s probably going to make $900 a month income. If you buy one
of my $45,000 properties, that makes 900$ a month income, then you’re going to be a
lot better off – you’re going to have twice as much income for the amount of money that
you’re investing. Joe: So it makes a lot more sense to buy the
cheaper property, especially if they’re in stable areas and they’re being managed by
a professional and they’re in good condition and have a good screening process for your
tenants. So that means having a good infrastructure of established people that are working a specific
area that know those properties. The other way you can do it is that, for example, is
that we sell properties that we’ve already sold on land contract to an end user, and
you buy the underlying deed for the property and you can make 15-18% on those regularly,
too. You don’t have to have a manager. We have a loan servicing company where they send
their payments to and essentially what you’re doing is buying the note.
Joe: It’s a little more complex than that. If you go to my website,,
you can see some of the ones that we’re selling, or you can get in touch with me personally.
I’ll be happy to talk to you about buying investment properties and what makes the most
sense. Only call me if you’ve got cash to invest. Don’t call if you want to get a loan.
Loans are so difficult to get now. I don’t even like to deal with them these days. But
if you’ve got cash to invest (at least $40,000 to invest) I’d be happy to sit down and take
some time to talk to you about what type of investment might make the most sense to you
and what we’ve got that we can sell, either myself or one of the folks that I work with.
Joe: So with all of that said, once you find a property that you can buy for cash, you
have two different strategies here – you can either sell it for cash, but if that doesn’t
happen you’ve always got your other exit strategy of keeping that property for the income. And
the only way that that’s going to make sense is if the income that comes in is better than
you can get through a mutual fund or through money market or through other investment utilities
that you’ve got. I hope that helps.


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