PODCAST
Who Is Mitch Stephen? Why is “Buy and Hold” a Myth? Why Owner Financed Properties?
Episode 1:
Mitch Stephen has been a self-employed RE investor for 20+ years. His real estate investing career started at the age of 23 when he read “Nothing Down” by Robert Allen.
REAL ESTATE INVESTOR:
Mitch, together with his wife, Tommi, and his daughter, Shannon purchased their fair share of local houses. Their company, Independence Day, Inc., has bought and sold over 1,300 properties in and about San Antonio, Tx since 1996. This company specializes in buying distressed properties with OPM and then selling those owner financed properties.
Cash4Houses.NET (Buying Site)
Homes2Go.NET (Selling Site)
MoatNoteServicing.com (Note Servicing)
STORAGE FACILITY OWNER:
The Stephen family built wealth by purchasing very affordable homes, selling them for double the cost, and owner financing the sale by creating a note to their buyer. In 1991, the family made plans to keep their wealth and create “Forever Money” by acquiring Self-Storage and Boat Storage facilities primarily around Canyon Lake where they live in Texas. They started with 13 boat storages in front of a state park at the lake, and the storage business has grown to over 1,100 storage doors in 16 locations.
CanyonLakeStorage.com
FlourBluffStorage.com
RockportFultonBoatStorage.com
AUTHOR:
Mitch is the author 3 books:
MY LIFE & 1,000 HOUSES:
Failing Forward to Financial Freedom
MY LIFE & 1,000 HOUSES:
200+ Ways to Find Bargain Properties
MY LIFE & 1,000 HOUSES:
The Art of Owner Financing
For more info about these books go to 1000houses.com/the-book
EDUCATOR:
Mitch offers Online Education, Group Coaching, and Full-on Mentorships as it relates to all the aspects of Owner Financing and owner financed properties.
Mitch’s personal expertise includes; Raising Private Money, Finding Bargain Properties, Negotiating Favorable Terms, Dealing with Renovations and Contractors, Selling Houses, Selling Notes with little to NO Discount, and helping others deal with the everyday throws of life in business. He is very familiar with Dodd-Frank, RMLOs, S.A.F.E. Act, Texas Property Code, Truth -in-Lending, R.E.S.P.A. and the legal options available in the owner finance domain. 1000Houses.com
Mitch forged the creation of a mass texting software, LiveComm.com to help solve problems that arise when you get numerous calls from bandit signs advertising Owner Financed Houses. http://LiveComm.com
What you’ll learn about in this episode:
- My story and why I started the Real Estate Investor Summit podcast
- How to become Financially Free using real estate as the vehicle and using Owner Financing as the primary strategy
- Why you don’t need money to be successful in creative real estate
- Why “Owner Financing” is so powerful
- Why the buy and hold strategy is NOT the best strategy out there
- Why you want customers to have the mindset of a BUYER– not a TENANT
- The core belief that fuels the “Owner Financing Strategy”
- How to get paid to create substantial, long-lasting cash flow
- Navigating the laws and regulations of Dodd-Frank. Don’t make it complicated.
- How to get paid 6 TIMES on every deal!
- How to do it all with OPM (other people’s money)
- How to calculate a property’s “Owner Finance Value”
- Where the Owner Financing Strategy works best
- Why the Owner Financing model booms in the bad times
Resources:
Transcript:
This is Mitch. And welcome to the debut of the Real Estate Investors Summit podcast and yes indeed I am your all-knowing and wonderful host, Mitch Stephen. I certainly hope that you have heeded that wonderful announcer’s warning to have your pen and pencil ready, because before this podcast is done, I am going to give you the exact formula for my success and I’m also gonna give you the mindset behind it and it has everything to do with owner financing.
The art of owner financing – where you buy a property and you sell it to a person, who gives you a down payment and then promises to make installment payments for years and years to come. So, that is the strategy of my choice, that’s what I’ve been doing for 20 years and that’s how I have achieved Financial Freedom and Independence and I’m going to share it with you by the end of this podcast.
Also, I wanna let you know about the Real Estate Investor Summit format. I specialize in owner financing strategy but along the way to finding the perfect owner financed houses, we find all kinds of different houses and we need to be able to capitalize on every single lead. So, this podcast is dedicated to bringing in the ancillary, surrounding peripheral help that we need to capitalize on any lead, much less the favorite lead of all time, as far as I’m concerned, the Owner Financed Lead.
So I will have all kinds of people on, when it comes to raising private money, doing subject to’s, lease options, rental units, just all kind of things, anything that I think will help, and I have a long list of very smart individuals inline to speak directly to this audience.
But right now, you’re probably asking yourself who in the heck is Mitch Stephen. That’s fair enough-fair enough. Who am I? For starters let’s start what I am not; I am not famous, nor have I made the news any time lately, nor am I likely to make the news anytime soon. I did not graduate from a prestigious college or university. I was really just lucky to get out of high school (Go, John Marshall Fighting Rams!), and you will not find me on any of the Forbes Top 100 list or the Top 500 list or even the Top 1,000 list, so at this point of the conversation, I’m sure you are all very impressed.
Probably thinking right now, you know I could be watching a really good I Love Lucy rerun instead of this. But, let me tell you who I am. I am, first off, a husband for 25 years, a Father, a Son and I used to be Brother though, I have no more brotherly duties till we meet again on another day. A little personal there, huh? Well, it’s OK. We’re probably gonna be personal on this podcast, too. We can’t separate personal, business and regular business 99.9% of the time, they’re all mingled in this big, old mix and so a lot of times we have to talk about what going on personally to get to where we wanna go financially.
What I am is a reasonably successful entrepreneur, if not very successful. It’s only a matter of perspective. I am a Christian that struggles every day and I’m a staunch conservative, I’m unashamed. If those last two descriptions – Christian and Conservative – deeply offended you, then quite possibly, it’s time for you to move on to another podcast of your choice. However, if I just mildly offended you, then just hang on for a little bit, let’s listen for a little bit longer because you’re gonna find out that we’re not that much different. We all want the same things and we’re probably gonna be end up being friends at the end of our time.
So what has Mitch Stephen done? Well, I have become financially independent and I am free to travel the world, if I wish, when I wish, with ample time and money. I’m the author of three books in a series aptly named “My Life in a Thousand Houses” for I have, to my credit, purchased and sold over 1,000 houses in my home town of San Antonio, Texas. Actually, that number is right around 1,300 about now but, who’s counting? I have mastered the Art of Cash Flow without being a landlord. This is very important because I’m not a really a strong believer in the Landlord Model and we’ll see the differences here shortly.
I’m an expert in a very, very niche strategy called Seller Financing or Owner Financing, as I described just a little bit earlier here in the commentary, and in this thrice weekly podcast – I don’t know if thrice is a number or not, but I hereby, as the commentator here and host deem thrice a word now – so in this thrice weekly Podcast we’re going to hear a lot about The Art of Owner Financing and how Owner Financing can be used to set yourself free financially and give you the time and the money to be the person that you always wanted to be.
Now, these accolades and about $7 will buy you a cup of coffee at Starbucks, right? But, quite frankly, I am in a position in life that many of the listeners out there would like to be in. I live in the greatest country in the world, period, I don’t have a boss and I haven’t for over 20 years, I have money in the bank, I have tremendous cash flow that far exceeds what I need to live day to day, and I have it all set up in systems that allow me to pursue my personal interests, whether those interests make me money or they cost me money.
I get to do pretty much whatever I wanna do these days, because, of a price I paid a long time ago, and the commitment that I had to get in some residual income where I wasn’t liable for everything in the world. So, why am I here on the Real Estate Investor Summit podcast? [Laughter] I love asking, I love interviewing myself because I asked such good questions and I love to answer them. I am here because, a little back story, so that you know where I come from. First of all, growing up I was not poor, however, I did not come from money, either. I think that our family was raised somewhere in the middle class, probably, lower middle class looking back on it. I was not poor until I left home and then I became poor [Laughter]. So, I spent a lot of time being poor, because I was too proud to ask anyone for help.
So, when I left home, went out on my own, I abruptly went broke as many of us do and I stayed that way for a while. Second of all, I’m not the smartest guy in the room, and I want everyone to understand that. I don’t think that I am, and I know that there are, you know, ingenious people out there. I am not an ingenious person, but I will tell you this, I have a ton of common sense, and that was my saving grace. I have ton of common sense and I have a huge work ethic. And those are the two things that pulled me through despite my lack of acceleration in traditional educational institutions like high school, a brief few minutes in college.
I am here because, if I can do it, I believe that you can do it if you want to, that’s the whole reason I’m here is because, I think that others can do this and realize the kind of freedom and the kind of life that I think everybody would like to have. I am here because a lot of people kept asking me, “Can you help me do what you’ve done, Mitch?”. A lot of people have asked me that, and I kept saying “no”, and I said “no” over and over for years because, for one, I hadn’t figured out how to make the time, you know, I hadn’t learned about systems yet. And the other thing was, I was not sure that I would be a good teacher and that it would be something that I would be good at because I have never really taught before.
I am here because one day, a person named Katherine Conner convinced me that I’d make a great teacher and she showed me how to do it. She talked me into stop saying no and so I stopped saying to just a few people to see how it would turn out, and it worked. And it was an emotional rush for me, to see that I could be instrumental in changing lives of people who, quite frankly didn’t know if they could but they wanted to really try hard. And, so, we took on that challenge and I saw people winning and I caught the bug that day, that moment. I am here because I know how to teach people a certain method that I used to get free. I’ve made a lot of friends along the way, friends that I thought, you know, I never saw these people on my horizon and now they are my friends and I think it’s a great environment and I love my friends that I’ve met here and have helped through the struggles. And last but not least, I am here because it’s the teacher that amasses all the knowledge more than anyone in the room, it’s the unwritten law of teaching, that I had to discover – I had to live it to discover it – is that, while I may bring 99 pieces of a puzzle into the classroom, it just takes one of those students to bring a piece that I did not see or that I did not know existed and all a sudden, I am better today than I was yesterday and it’s all about brain consortium really, the people that attend sometimes the classes, the students that I have, may not be as equipped as I am in a certain arena, but they also come from different places in the world or different places where the angle they look at things is just different and when we have different people looking at the same thing from different angles, we get a different perspective and I learn something all the time because of that dynamic.
And now that introduction of who Mitch Stephen is, that’s out of the way, I’d like to get to the meat of the matter and deliver on the promise that I stated at the beginning of this podcast, which was to describe to you how I became financially free using real estate as a vehicle in owner financing as the primary strategy.
Let’s get the mindset all the way first. Number 1, you don’t need money to be a success in the creative real estate investing arena, you absolutely do not need money. What you need to do is be able to find terrific deals, and I’ll get to that soon. Number 2, I believe the Buy and Hold strategy is largely a myth for most of the novice investors out there in the world. And, that is to say that this buy it, rent it out till it’s paid for, via landlord theory, Buy and Hold theory, I think there is a better way personally – not that there haven’t been a lot of millionaires and billionaires made out of that rental model, but am gonna show you some differences that you may find very appropriate and you may start to come to the conclusion that maybe that’s not the best way to start a career in real estate.
The idea of borrowing money to become a landlord, the idea of making a profit between what you owe and what you collect, I believe is highly overrated because when you are responsible for every single thing that could possibly go wrong, it simply ridiculous to think that you can maintain that spread between what you owe and what you collect. So, let’s think about it like this: You borrow $50,000 to buy a house that you’re going to rent out for $1,000 per month. Now by the time you subtract the mortgage payment that you have, the property taxes that you are responsible for, and the insurance, the hazard insurance in case the house burns down or blows away or floods, and of course the unknown overlooked insurance that you should have and hopefully you do have if you have rental properties, is the liability insurance, because you don’t wanna own rent properties without liability insurance.
And so let’s say, that you are clearing now out of that $1,000 a month, you are clearing out $300 per month. $300 a month is what everyone is running into this rental business model looking at, everyone is jumping up and down, saying “Hey, I just bought this house and am gonna have $300 a month positive cash flow and we’re all doing the jig”, but what happens is, that $300 a month is a myth. That $300 a month is what you collect if nothing went wrong. Now let’s look at what might go wrong because you are responsible for everything in the world on a rent house, this is gonna take a minute, you are responsible for everything; roofs, gutters, hot water heater, plumbing, electrical, sinks, faucets, shower heads, faucet handles, lawn maintenance, trees, sprinkler systems, termites, insects, pest control, windows, broken glass, doors, garage doors, garbage disposals, dish washer, dryers, stove, oven, microwave, fridge, freezer, central heating and A/C units, fences, gates, lawn maintenance, I mean the list goes on and on and on, and in order for you to collect that $300 a month positive cash flow, nothing can go wrong with this list and I just touched on a bit of it here.
So, not to mention, early move outs, lost rents, eviction costs, the make ready repairs necessary for when you have to prepare for a new tenant to take place of the old scoundrel and to think that a deposit that is generally equal to one month’s rent, so on this example, a deposit of a $1,000 is going to cover the make ready cost and the damage of a renter that’s been in your house is not likely that a $1,000 is gonna cover all, you’ll spend that $1,000 in a snap of a finger. So, the point is this; if you think you are going to net $300 per month, your plan is severely flawed in my humble opinion for the reasons stated and more. Just one major blow out of an A/C unit, and it could cost you half a year’s positive cash flow, if not the whole year, because that’s one of the things that costs the most in the landlord business is heating and A/C units.
So, let us compare those liabilities to an owner financed deal where you are simply the bank, you’re just the bank, you’ve taken a down payment, you sold the house, you’ve agreed to collect X amount of payments for X amount of months, probably years and years and years and this can be a much different situation. First off, the mentality of a buyer is far different from that of a tenant. Tenants tear things up and leave your properties, buyers fix up the properties and stay. This is quite a different dynamic in their mindset. Second, the amount you can collect as a down payment can be as much as $5,000, $10,000 down, $15,000 down or more. This week, I collected $30,000 down towards one of my owner financed houses and that simply doesn’t happen in the rental game. When was the last time that you got a $10,000 non-refundable deposit for someone to rent the little old house in your little town USA? Probably never. I mean, if someone has, I’d like to hear about it, but I’m sure there’s some special circumstance. It’s not normal by any stretch of imagination if it’s ever even happened.
So, let’s explore the Owner Financed Strategy. The core belief in Owner Financed Strategy is based on a simple statement, and that statement and core belief is, that a person paying a $1,000 to rent would rather pay a $1,000 to own, and this is the core belief. If you don’t believe this, or you don’t think that it’s highly likely that most of the people that rent would rather own if it cost them the same, then you need to stop right here and owner financing strategy is not for you, because you have to believe this core belief in your heart of hearts. A person paying a $1,000 rent would rather pay a $1,000 to own. So, let’s start with how we establish an owner financed value of a property. Let’s use some real numbers here, so this is where you pencil and paper is gonna come in handy, because you might want to jot this down.
Let’s say, the rents are $1,000, and so, we’ve gotten on – and this rents, are pretty easy to establish with today’s technology, much easier to establish than traditional values because when we just wanna find out what the rental value is, we can go to websites like rentometer.com or zillow.com or trulia.com, and we can back in intoto these rents and try to establish an owner financed value, meaning how do we move this person from paying a $1,000 rent into paying about the same amount of money to own, which should be a $1,000, give or take a few bucks. So, we get into our computer and we figure out the rent is $1,000 for this little house that we are contemplating buying and so, we need to figure out what is the owner financed value. We do that by taking the $1,000 rent, subtracting the $120 for the property taxes, subtracting the $75 for the property insurance, which has left over $800 per month.
The tenant in this house, if you take the taxes and insurance away from the rent, it leaves the tenant $800 dollars per month that he could pay for principal and interest, if someone would give him a loan to buy this house. If we use the terms 30 years and 10%, we can take our basic amortization program or app on our phone and discover that the tenant can afford to finance, $91,160 dollars and some change and his payment will be $800. Now, for easy numbers and easy math, let’s just say that it is $91,000. So, $800 a month left over for principal an dinterest, this tenant can afford to borrow $91,000, at 10% for 30 years.
Now, to arrive at the owner financed sales price, we take the $91,000 in this example and we multiply it by 10% and we add 10% on top of the $91,000 for a down payment and we arrive at the owner financed sales price. So, $91,000 times 10%, roughly $9,000 dollars, we’re gonna use $9,000 here, it’s really $9,100 but for easy math, we’ll use $9,000, we add $9,000 to the $91,000 financed amount and the owner financed sales price is $100,000.
Now, I wanna be very clear on this, this is the owner financed value. It is not the M.A.I appraiser’s value, it is not the Comparative Market Analysis or the CMA, where you used solds around the neighborhood in the last 6 months to establish value, this is not that. This is not the broker’s professional opinion, which all the brokers did was perform the CMA and tell you what the value is based on comps, comparable sales. It’s not, a Broker’s Professional Opinion or a BPO, this $100,000 value, is the owner financed value. It is the value that is given to the property if you believe the core belief, that a person paying a $1,000 rent would rather pay a $1,000 to own, then this is a set of circumstance that this could be done and we could move this person from being a tenant to being an owner.
Now, what separates them from the ownership is that $9,000 down payment. That $9,000 down payment is very critical. We want at least get 10% down, because in most cases, the tenants that want to become home owners don’t have great credit or they would have already gone and gotten a traditional loan and a much lower interest rate and they would have already become homeowners. The glue that make this work is the financial commitment of the tenant, who’s moving from being a renter to being an owner, and what makes me comfortable with that is that they have some skin in the game, they have $9,000 at least. Now, I like to collect more than 10% down, because the more money I get down, the stronger this deal is, the more likely is it’s gonna last into perpetuity till the note exhausts.
So, establishing value is your number 1 asset and it’s really the number 1 asset in any creative real estate investing endeavor, because, if you can’t establish what you can sell something for, then how in the world would you know what to offer to buy it for? If you get this number wrong, then, you know, everything could go to hell in a hand basket right away, because everything is based on the assumption of what something is worth, all your decision have got to come from that number and it’s a very important number and the reason it’s so important and it has to be accurate and this is why is, if you’re gonna buy something and try to make a profit on it, you cannot know what to buy something for if you don’t know what you can sell it for.
So, now that we know what we can sell this property for, $100,000, we can begin now to make a calculated offer to purchase the property. So let’s continue with this example using the same numbers and we’ll refresh right here. We’ve got the rents for the a $1,000, we’ve subtracted $120 for property taxes, $75 for the insurance and arrived at $800 that the tenant had left for principal and interest and we’ve established that this person could afford to finance $91,000 if we use the terms 10% in 30 years. Now looking at this house, it’s not hard to figure what these values are, like I said, you could do it on a laptop parked right in front of this house. You would go to www.rentometer.com or some site like that, you find out what the rents are, you go to the county tax assessor collectors site and type in the address and find out what are the taxes are per month and then you’ve done your homework and so you know that houses in this neighborhood and in these price ranges about $75 per month, so you plug that number in and this is how we arrived – this is how we physically do this in front of the house.
Now, I get out my amortization app and I plug in $800 for the payment, I plug in 10% for the interest rate, I plug in 360 months for the 30 year term and I solve for the balance and so that balance would come out to be $91,160 and, as I stated before, we’re just gonna use the financed amount to be $91,000 for easy math here. Now that we added the 10% or the $9,000 to the $91,000 financed amount, we’ve arrived at the $100,000 sales price. But, at this point in the conversation, I’m not focusing on the sales price. I’m focusing on how to make an offer on this house and I’m focusing on the $91,000 financed amount, because if I can buy this property for 50% of what the financed amount is, then this is a home run deal. I like using the 50% number because I can divide by 2 really easy and so that’s why I picked the financed amount instead of having some other number I’d have to do a calculation and have to have a calculator, I picked the financed amount because, if I have to divide that by 2, I find out that if I can buy that house for $45,500, then this is a home run.
Now, in my wildest dreams, I’d like to borrow $45,500 and be owed double – $91,000 – and this is just the bar, it is the home run bar. It’s a bar that I measure by. I could pay more and it’s still be a good deal. I could pay $47,000 for this house, I could pay $48,000, shoot I could pay $50,000 and it’d still be a great deal. OK? It just wouldn’t be a home run. $45,500 is a home run and it’s just something I use to measure by. I don’t get always home run deals, sometimes I get base hits, sometimes I get doubles, sometimes I get triples but this is the bar: $45,500 is a home run. It’s half of the financed amount, $91,000. Now, on the other hand, if can get this property for $40,000, I’d have a grand slam. Well you know, a grand slam is when knock the ball out of the park and the bases are loaded and you drive in four runs, you’re running the other 3 guys on the bases, for those of you who are not familiar with baseball, but nonetheless, forget about the baseball analogy, it’s a big, big, big winner. You know, so if I can get it for $35,000 or $40,000, I’m just dancing in the street. If I can get this house for $35,000, you’d probably find me out taking a victory lap around the neighborhood with my hands over my head, you know, cops will probably try to arrest me for public intoxication but it won’t be from booze. I will be intoxicated but it won’t be from booze it’ll be from the fine art of living well and doing well and being high on life.
So, believe me when I tell you I am an addict; I’m addicted to these deals and I’m what you call a deal junkie, because once you do some deals like this, you’ll want to rinse and repeat as often as possible and that’s where I am. But there’s even more to this story than we’ve gotten to yet, so let’s finish out this case study and see how the numbers fall.
Let’s say I do buy this house for $45,500. Now, I always borrow $2,000 more than a property cost me all-in. You know that’s – If it needs repairs and I need that, I borrow that, if it has closing cost, I borrow that, I always borrow in excess of $2,000 above and beyond what I need. In this case, say the house needed no fix up and I borrowed $47,500 and I put that extra $2,000 in my left hand pocket. Now I want you to understand about this $2,000 is that $2,000 is a tax deferred $2,000, I don’t have to pay income tax on it right away because it’s borrowed money and you don’t pay tax on borrowed money until a major event happens, like someone pays me off or I sell the note and realized all my income.
If anyone asked why you do you borrow $2,000 more than it cost, if anybody asked why do you borrow $2,000 more than what the house cost, you simply tell them, because house – you simply state because finding houses is not free. And so I wanna point this out for a lot of investors out there that are running around finding houses, and you are not adding back in some kind of expense and reimbursing yourself for the cost and the time and the energy that it takes to find houses, then it’s no wonder why you don’t feel like you’re not making any money at the end of the day because you’re not compensating yourself for a true cost of goods, and on average I find it takes about $2,000 to find the right kind of houses.
So, I borrow $47,500 from a private lender, I used O.P.M. Other People’s Money to buy my houses, and I borrow this money at 8% interest only, for 5 years non-recourse, which means I don’t have to sign, personally, that houses the guarantee if I – for whatever reason didn’t make my payments, then my lender can only take the house as collateral, a collateral only loan or a non-recourse loan. So again, I borrow $47,500 from a private lender at 8% interest only, for 5 years non-recourse and my outgoing payment to my private lender is roughly $315, I’m rounding this up by a dollar or two here for easy math. $315 I owe every month for the right to borrow that $47,500. Now let’s go the next step: I own the house now, and now I sell the house. I sell the house as-is for $100,000 with $9,000 down and I put that $9,000 down payment in my right hand pocket. I financed the $91,000 for my buyer and I charged him 10% interest for 30 years and my buyers payment is $800 per month exactly as I planned.
So, this person has moved into the house owes me $800 a month. You noticed the difference between what my outgoing payment of $315 and my incoming payment of $800 is. If you don’t have a calculator with you, I’ll do it real quick: $800 coming in, minus $315 going out to my private lender equals $485 per month positive cash flow and this is a true positive cash flow, because in this scenario, we are not a landlord: we are a bank and when that $800 hits my account, it is my money. Now out of that $800, I have to pay my private lender $315 of it but I get to keep the spread. And that is not maybe I get to keep it, it means I get to keep it for sure. I get to keep $485 every month when the payment comes in.
You see when you are landlord, you could have a situation like this, you are not sure if you can spend it or not, you are not sure if the $485 per month is yours or not, because you could go for a couple of months you could be fine, and then an air conditioner could break, and you could owe $3,000 dollars.
So, apparently, the money that you are collecting wasn’t yours, it was the air conditioner men’s. You see, I got fed up with that, because I was doing a heck of a job collecting money for the air conditioner men and the carpet cleaning men and the roof repair men, and the water heater fixer guy and all that stuff, I was collecting my butt off and then having to hand out that money that I collected that I wished was mine and have to give it to those guys.
So, do you see in this scenario where I collected, $11,000, the $2,000 upfront when I borrowed the money and the $9,000 when I collected the down payment, $11,000 cash upfront to create $485 a month positive cash flow for the next 30 years. That is quite a statement. 30 years of $485. Anyone care to do the math? Let’s do the math. What is $485 per month times 360 months? It calculates out to be $174,000 over the period of the loan. So, I paid myself $11,000 to create a potential income coming over for the next 30 years into my pocket of $174,000.
Do you see how this might make you a multi-multi-multi-millionaire? If you do one of these deals once a month for twelve months, what would your year look like? Now, let’s take a look, let’s get out our calculators. Well, you’d have $11,000 times 12, because you would have collected 11 down payments, and that would equal to $132,000 cash that you’d put in the bank that year, and you’d have monthly cash flow of $485 time’s 12, which would be $5,820 per month, positive cash flow with hardly any liabilities at all. Hardly any, basically zero. So, if the air conditioner breaks, it is not your air conditioner, you sold the house, it is not your house nor it is your air conditioner. So, it’s not your problem if the air conditioner breaks.
You have sold this house with owner financing, with seller financing and you are simply collecting the payment of $800 every month and then paying your debt to your private lender. Folks, I’ve been doing this for 20 years. Sometimes, 30 and 40 per year, sometimes more than 30 or 40 per year. In 2015, I did just under a 100 houses, in 2015. One year, I did 150 houses exactly, 150 houses. So, to think about doing one a month, might seem a little ominous at first because you are not acclimated but, once the wheels get rolling, it is astounding just how many houses you can buy and just how many situational properties there are out there.
It comes down to a few basic things. One, you need to learn how to find great deals and how to contract them up to your advantage, meaning, give yourself some time before you have to close and, make no mistake, it all starts with the deal. This whole business is predicated on the ability to find a great deal.
Number two, you need to learn to find sources of funding or private lenders. You have to be able to fund these deals. The difference between making a good living and being a multi-multi-multi-multi-millionaire in this business is your ability to find and keep private lenders for years and years and years. I have done that for years and years and years.
Number 3, you have to learn how to spell deals and how do you move these properties once you own them. That’s probably one of the easiest solutions on the planet right now. I have lots of ways to do that, we’ll be talking about that in the future. And more than likely, you’ll gonna need to have the right coach and you don’t have to have a coach but to try to go it with any business, and not hire someone who is where you want to be, who has gone through things that you don’t want to go through to get to where he’s gotten to, that you could avoid, and to be able to shortcut the learning curve so that you go straight to the things that matter and avoid the things that don’t matter, it would be foolish not to hire a coach.
The trick is where do you get the right coach and who is the right coach? To get this presentation, on a little bit easier to follow PowerPoint, because you have pictures, graphs and stuff, you just go to the link there in the shown ups and there is a PowerPoint presentation that will give you some different case studies and you’ll be able to see all the numbers laying on the page and it might be a little bit easier for you.
Now, I can hear you guys thinking, I can hear the gears inside your head. And I can hear a very prominent question and a very common obstruction to you jumping into this basic model of owner financing and it is when I said when I borrow the money from private lenders or OPM, and you are thinking “How in the world am I gonna find the capital to fund these deals?”.
Well, you are in luck, because the next topic, Episode 2 at the Real Estate Investor Summit podcast is gonna be about raising private money so that you can fund your deals and part of it is gonna be a little mind adjustment on your part, because right now, you’re probably your biggest enemy when it comes to raising private money and I’d like to change that for you. We are gonna change that. So make sure you see Episode 2 of Real Estate Investor Summit podcast coming to you shortly.
So, that’s all we have today. This is Mitch. Getcha Some…
