Part Three of Five: “E” = Equity
Another benefit of real estate is the pay-down of the mortgage over time. You don’t actually pay off the loan — the tenants do! Every month you receive rent and make a payment on the loan, you are putting money in the bank as principal pay-down of the loan. I call my houses “banks.” What better place to keep the Equity build-up than in those individual banks spread out in different neighborhoods?
Next week we talk about “A” for Appreciation.
This is the topic of this Tuesday’s LIVE STREAM with Lou Brown. Lou has been an investor and mentor for over 40 years. Thousands and thousands of people have come to Lou to learn his unique approach to real estate investing.
Timestamps:
0:01 – Introduction – “ Let me help you advance your business and wins for the week”
0:28 – Lou’s Wins of the Week
3:20 – https://www.StreetSmartWiz.com
4:41 – E for Equity – Real Estate is the I.D.E.A.L. Investment
7:50 – Should I use equity in my personal home to buy more property?
9:51 – Lou’s recent deal – another win of the week
14:50 – A question about Bitcoin: My buddy just put 5k into Bitcoin he is almost a millionaire, why is property more valuable?
18:24 – Never invest in Bitcoin using your Equity
18:59 – Why should I want to hold property, doesn’t land-lording suck?
21:35 – https://www.WealthBuilderWorkshop.Online – on July 31st – register for $1 – How to find a buyer before you buy a property.
If you are JUST getting started in real estate investing, you NEED to attend my ONE-DAY virtual training. I teach it LIVE over ZOOM, and it’s only $1 (yes, one dollar) for SIX HOURS of solid how-to training! https://www.wealthbuilderworkshop.online
If you’re ready for a more in-depth experience, then you owe it to yourself to investigate my THREE- DAY Millionaire Jumpstart Event. I host it four times a year in various locations, and you can attend LIVE and in person. I’m your coach all three days. Find out more at https://millionairejumpstart.com/
Listen to our Podcast:
Why Real Estate Is I.D.E.A.L. – “E” = Equity – Part 3
Lou Brown:
Welcome! We are live in the Street Smart world, and I wanted to give you some great updates on what’s happening and help advance your business and wins for the week. And not only that, I’m going to be talking about “E” for “Equity.” I’ve been doing a series here called “Real Estate Is The Ideal Investment,” and over the last couple of weeks, I’ve talked about “I” for “Income” and “D” for “Depreciation.” And today we’re going to be talking about Equity. But first I wanted to talk about wins of the week.
Well, wins over the last week have been many. We had an awesome Millionaire Maker Club, so to speak, at the platinum mastermind event in Nashville, Tennessee. We had our traveling mastermind. Once a year, we go to one of the towns of a mastermind and we had a fantastic event in Nashville. A fantastic experience. We have 2 of our masterminds in Nashville, Tennessee, and oh my gosh, the expansion of their businesses, both of their businesses off the chain. It was really great. And thank you to Bill and Tina Flume for hosting us and doing such a great job to help us get set up there. We held our event in an old bank. They had converted the bank into a hotel. It was so cool. I went down, I got to see the big vault in the basement. It was just amazing.
And being right there, downtown where all the action is in Nashville was just really terrific. And I’ve got to spend some time with the platinums and, oh my gosh, the things that have been happening were just terrific. I got to tell you about the amazing advancement in people’s businesses. For example, we had Brad and Christine Treganowan, I had them on the Sunday night call talking about one of the case studies that they have been working with. A client that came to them through the House Monster had money to put down, but couldn’t qualify for a loan at the bank. Well, not a problem. Brad and Christine, with their Path To Home Ownership were able to help. Now they first came to the table with 20,000 and then 30,000, and then they built up to $50,000 down. The Treganowans were able to buy a house for them.
And in fact, they worked with the seller, got the seller to carry back financing, and were able to raise private money to do the deal. It was just really terrific, the whole deal from start to finish. I’ve got a video clip of that, we’re going to be posting that on YouTube. You got to watch for that. That’s going to be one of the notifications, by the way, if you’re not yet subscribed, you need to subscribe. You can go to StreetSmartWiz.com and scroll down, and you’ll see how to link over to our YouTube channel.
And I’ll tell you a little sneak peek into the Treganowans’ deal. Not only did they get $50,000 down from the buyer, they were also able to purchase that property well below market and with the extra lot that they negotiated into the deal. Well, the Treganowans have made over $100,000 on that deal and a very happy customer that bought it from them said that the house is just absolutely perfect for her needs. So certainly that’s one of the great things that we do at Street Smart is we solve people’s problems, whether it be a seller, whether it be a buyer, whether it be a lender, listen, that’s what we do. That’s how we do it. And there’s some really great profits that’s available in it as well. So this week I wanted to talk about our continuing series of learning about real estate, as the “IDEAL Investment.” I wanted to talk about just the amazing thing of Equity.
Equity is something that occurs, that is the difference between what you pay for a property and what it’s worth, and that difference in between what you pay and maybe what you spend to fix it up. Well, that difference in what it’s worth at your sale of the property that is called “Equity.” And when you add our business model to it that helps people to end up with home ownership, regardless of credit or financial background, you actually get a premium boost in the price, with the buyer’s knowledge and consent that there is a markup involved in it for the risk that you’re taking. And sure enough, there is an opportunity for that wonderful thing called “Equity.” Now, equity is a great thing because when you own property, equity is something that is always there, always present. And depending upon the market that we’re in, you’re always able to earn income off equity when you’re investing in income-producing property.
So, remember, with real estate being the IDEAL investment, “I” for Income. “D” for Depreciation, one of the great things we get for investing in income-producing property and particularly residential income-producing property. And then “E” for Equity. Equity build-up, equity at the time of purchase. And another way that we get equity is to force equity when we fix up a property and bring it to current market conditions, current market values, then we’re able sometimes to, if it was just in bad condition or hoarder house or whatever, boom! We can increase the equity on a property by doing the fix-up. So that’s another way that we advance ourselves and our business. And next week, I’m going to be talking about the next letter in the alphabet. And that is for IDEAL investment, “A” for Appreciation, and then we’ll end the series with “L”for Leverage. So I don’t know if you’re like me, but I believe that real estate and particularly income-producing real estate is the IDEAL investment.
Scott Paton:
Awesome. So Lou, we have a couple of questions right now. The first one is from Erica. “Should I use equity in my personal home to buy more property?” That’s a great question, Erica.
Lou Brown:
That is a great question. And certainly I would say that if you have the ability, if you have the knowledge, if you have the backup for someone else to look at that deal and confirm that there is equity, because one of the things that’s so important is that you confirm the value of that property. Now value comes in several different ways. It’s certainly what someone is willing to pay for a property. And sometimes you can look at comparables and you can say, “It’s worth this.” Well, did you look at enough comps? Did you confirm that with experts? Are you sure about that value? Well, let me tell you how you can confirm that the value is there. Our business model is to find the buyer before you even buy. And not only that, find a buyer with downpayment money, and not only that, confirm what they earn on a monthly basis so that we can determine that they can afford the property that we find for them.
Now, if I’ve already got that customer and I already know what they can pay, then when I’m purchasing that property, any number below that is equity. And so definitely if I can buy this property here and sell it here, and there’s a nice spread of equity in there, I would be willing to absolutely use the equity in my own home to purchase that property because I have approached the business model the correct way, meaning that I’ve already got a customer. I’ve already confirmed that customer. In a lot of cases, I’ve already gotten their downpayment money. And that’s a beautiful thing when you’re going out and buying property and perhaps pulling equity out of your home. That’s a great question.
Scott Paton:
So, just to follow up on that, Lou, I’ll put you on the spot a little bit, but you just did a deal in a very expensive part of the country. And of course the whole goal is to get people into their homes and own it. And we have different levels on the Path To Home Ownership, I wondered since it just occurred like a few days ago. I think you closed on Friday, maybe you want to talk about that particular deal because it fits in so much with this equity and the downpayment that you’ve been talking about.
Lou Brown:
That’s an interesting one to bring up, Scott, thank you. I guess that was another win of the week as I rattled them through my brain. I’m going, “Oh gosh, last week was an incredible week.” And you’re absolutely right. Thank you for reminding me about that, that we did actually close on a property on Friday. And in this particular case, we had our buyer with $150,000 to put down in Washington state and this buyer came to the table and said, “Please, please, please, can you help? We own a business. The banks won’t give us any funding. We want to buy a property. We want to use it for our business. Can you help us out?” Well, sure enough, we were able to do that. We were able to fund that deal. They brought 150 to the table. We brought the rest to the table and they were absolutely thrilled.
At any time in the future, they can get a new loan. And one of the great things when you’re working with someone like ourselves is now they will have a payment history and they will be refinancing an already existing loan, which makes it so much easier with a bank than a brand new loan. If they had had to go through the brand new loan process, then it would have taken at least 30 days. And in a lot of cases, 60 days when we’re dealing with businesses. So in this case, they were able to get the deal, get it closed, and meet their deadline. And that was one of the big things that allowed them to purchase this property was a very competitive bidding situation. And it was because of the 7-day close that they were able to snag this property out from under other people that put in contingency contracts and inspection contracts and other types of contracts. They just came in and snagged it out from everybody because of the 7-day close. And we were able to bring that money to the table. How’s that?
Scott Paton:
That’s pretty awesome. You covered everything I was going to remind you of. One of the things with this particular area that they were trying to buy in, which I think was south of Seattle, is the market is so hot and everything is going so fast. This was the third house, they were kind of chasing the price and then someone else got it and then chasing the price and someone else got it. And then finally you came. Without your help, they would never have gotten this property.
Lou Brown:
Well, I guess we’ll call it another win of the week. And Scott, thank you for bringing this up. Literally, before we got on this call, I was on the phone with an agent, discussing a lot that we have in a town in Atlanta. And in fact I said to the agent, well, “The house next door was a new house in 2018. And I think it sold recently.” And she looked it up. She says, “Yes, it did.” So, recently it sold at the beginning of the year for $537,500. But today, they put it back on the market for $825,000. I said, “Shut the front door. I say, “What are you telling me?” And she said, “Oh yeah, new pictures.” So, in fact, when I got on here, I was actually looking at the pictures, but whomever the renovator was, came in. Now, remember this, they bought it for 537, but they came in and put a beautiful lap pool in and they redid the kitchen.
Now this was a house built in 2018. Right. But they gave it a kitchen do-over and did some other things. And I’m telling you, in a town as crazy in Atlanta, and sure enough, now they’ve put it back on the market today for $825,000. Now talk about a markup. I don’t know what they spend on that pool and all the other stuff, but I intend to find out, I will tell you that. But they stand to make at least a hundred grand on that, depending on what they’ve spent on the property. And guess what? I own the lot directly next door to this. Or let me just say a trust that I’m familiar with, owns a lot next door to this. And this is going to be some fun for a builder to come in or an individual that wants to buy the lot and build their own beautiful home there. I think we just set the market on another one. So you’re absolutely right, Scott, that in some parts of the country, the market is crazy.
Scott Paton:
Awesome. So we have a Bitcoin question and because it’s a Bitcoin question, I happen to have a little something for before we ask the question.
So I think it’s important that we talk about Bitcoin from time to time to time because when it’s going through the roof, I get hundreds of LinkedIn and Facebook friends coming out of the woodwork, telling me how they can make 10% a day or an hour. And then when it tanks, they all disappear and it’s crickets. And of course it’s gone up and it’s gone down, it’s gone up. It’s pretty crazy. But someone asked a question I thought was really good. My buddy just put 5K into Bitcoin and he is almost a millionaire. Why is property more valuable?
Lou Brown:
Well, I doubt that he just put 5K into Bitcoin. It’s probably something way back when, when Bitcoin was at its infancy that would bring him to the point of millionaire status. But I will tell you that someone that I heard about very recently, just got incredibly scammed by a Bitcoin scam. And what happened was, he said, “I mean, it was going up like you could watch it. It’s right there on the screen. Isn’t it true? It’s right there in the computer for goodness sake. Don’t you see it going up? Can’t you see it going?” And I said, “Yeah, that’s interesting.” And to me, to be honest, I think it’s fool’s gold. And the reason I say that is because I can’t touch it. I can’t feel it. I don’t know about it. And I do know of someone that lost hundreds of thousands of dollars investing in this scam.
I’m not saying Bitcoin is a scam. I’m saying that what he invested in that was like Bitcoin was a scam. So when something’s in its infancy and it’s going up and is going down, you’re absolutely right that there can be incredible gains and incredible profits for some people. But me, I like to touch it. I like to feel it. I like to monetize it. If I can move somebody in that very quickly after I buy it and start making a monthly dividend, I’m a very happy camper. And if I do it with our business model, which I always would, that means I’m going to get some downpayment money. I’m going to get a premium on the sale of the home. I’m going to get some benefits in doing our business model over the top of just real estate. And to me, that’s just a safer game to play. That’s a longer-term game. It’s got a residual income attached to it and for sleeping well at night, that’s what I like.
Scott Paton:
I agree. The only people I know are the people that bought Bitcoin at 20, when it went down to five and then bought it at 50, when it went down to 30. And the sad part is, is they would have mortgaged their houses to the hilt, or they would have sold everything. It wasn’t playing money that they were playing with. And I think, this is a case of the tortoise and the hare, and the tortoise usually comes out ahead in the long run.
Lou Brown:
Amen, and going back to that other question, you asked me about equity. I would never ever take a risk on something like Bitcoin using equity in my home. But as far as a real estate deal, already having a customer, already having a downpayment, already knowing what they can afford on a monthly basis. I would take equity out of my home every single day.
Scott Paton:
So what you’re saying is bet on the sure thing, don’t bet on the fad?
Lou Brown:
That’s right on. What do they call it in Vegas, betting on the come, that might happen. It might not happen. Who knows?
Scott Paton:
Tony has a great question. “Why should I want to hold property? Doesn’t landlording suck?”
Lou Brown:
Tony, actually, you have touched exactly where I’m at in this business. I think landlording does suck. I think you’re absolutely right. Really, dealing with tenants, trash, toilets, trouble, all of that stuff is real in a lot of people’s lives and a lot of landlords lives, but that’s not the game that I chose to play. In fact, that was the game that I started with and I decided to shift and change my paradigm in real estate, and I decided, “Hey, let’s take another look at this.” Let’s figure out all the things that don’t work. Let’s figure out all the things that don’t make sense. Let’s figure out all the pain. Let’s figure out all of the suffering, let’s make a list of all those things. And then I set about creating a business model that dealt with a lot of those things.
So I’m very happy with what we are doing right now. And we do not consider ourselves to be landlords at all. In fact, we tell people that are joining us that we are not landlords. Look, when you get involved with us, you get to know you’re on the Path To Home Ownership. And if that’s not where you want to be, this is not the program for you and this is not the company for you because the only thing we offer is the Path To Home Ownership. And we work with people regardless of credit or financial background to help them end up with home ownership. And if that’s you, that’s a great thing. Well, Tony, what I find is that’s a much different client than a typical renter. So the typical renter, they are expecting you to come over and the light bulb.
Why? Because that’s what they get at the apartment that they live in. That’s not what we do, and that’s not what any homeowner does, right? Any homeowner expects to change their own light bulbs. Any homeowner expects to do their own maintenance, their own repairs, hire their own people, change their own filters. And that’s what we want is folks that are looking to do that. We help them and train them on becoming good homeowners and successful homeowners, and we help them along that path. We even support them through our rent-to-own plan and help them in moving up the Path To Home Ownership. And part of that is them taking some responsibility for taking care of the property.
No comments:
Post a Comment