Equity Goose

Most people save for retirement by setting up a single savings account that they tap into from time to time for emergencies. They’ll save and save but inevitably have to draw down multiple times due to financial emergencies or splurges like vacations. When your retirement and emergency funds are in the same place, it’s very difficult for those funds to grow.

The solution to this problem is to have separate accounts. You should have one savings account that you can never touch or tap into- this is what I like to call the “Equity Goose” (see the link below for more information). The Equity Goose is a sum of money that never decreases in value, it’s only purpose is to purchase assets that cash flow like real estate or to earn interest.

So the ideal situation is to have your Equity Goose account that only increases in value, and a separate emergency account that may rise or fall depending on circumstance. In addition to these accounts, you should have multiple other accounts for all the other things you’re saving for- vacations, a new car, your kids’ college educations.

Compartmentalization

A great resource for creating these multiple accounts in INGdirect.com. While I don’t get any financial benefit for mentioning them, I like them because they have a higher interest rate- 1.5% at the moment, which is much higher than other money market accounts. They also allow you to open up several accounts online very easily, which sure beats sitting down with a banker who’s questioning why you need six accounts.

Learning to compartmentalize your accounts is an extremely valuable tool! Practicing it will allow you to save much more money and put you a few steps ahead most Americans.

Links

For more information read “The Equity Goose and the Cash Flow Golden Egg”

To visit INGdirect.com click here

Goals

Today I want to talk about partnerships. I’ve actually had two members come in today and ask the same question- “How do you do this?” The first person called in and said “I’m looking to create a partnership, how do I structure it?” The honest answer to that is that there are a million ways to structure your partnership- you can structure it however you want to.

I recommend that you sit down with an attorney and structure it within the legal limits of the law and where everyone is on the same page as to what the partnership is. Have it drawn up so everyone understands it and it’s on paper. So that’s really the first step- figure out what you want to achieve with your partner, what you’re going to do, and what the goals of that company are.

Deals

The second question is, “Ok, I have a partnership but how do I structure a deal?” There’s several ways to do that as well. One way is for one partner to be the lender. We look at all our private lenders as partners in our deals because not only do they get an interest check but they also receive a portion of the equity in the property.

Another way is to have both of you be on title. So your company and their company both go on title for the property and both have a piece of ownership, and you share all the responsibilities with the loan.

There’s other ways where one can be an elite and one can be a passive. That way one person may be doing all the work- finding the property and rehabbing the property and managing it, and the other is just financing the deal.

So there’s several ways to do every partnership. The key is to sit down, structure it and write down what you want to achieve in the partnership and move on from there. So day one, start figuring out what you want and go for it.

Contractors

Today I want to talk about dealing with contractors. I actually had somebody go into my office today and complain that since I’ve been doing this for seven years I get better deals from contractors. I get a better deal because I deal with them in a different way.

Most people are afraid- they get emotional and they kind of get bullied by contractors. They may commit money up front, but then their time lines make it out of whack. You have to remember that this is a business relationship, so every time you’re dealing with a contractor leave it that way.

When I meet with them I have a budget, and we both sit down and work out a time line that fits our numbers. But you can’t allow yourself to get emotional and change things. You have to establish everything up front as far as what you want to achieve when dealing with contractors. Then you have to hold them to that and if they can’t meet or exceed it then it may be time to get a new contractor.

You need to find someone who can work on a daily basis with you, who you trust, and is someone who can achieve what you want to achieve.

Many people don’t really understand what a title company does. Title companies are important to our business because they insure a clear title on our real estate transactions.

I originally posted this video on my blog, GeniusTypes.com, but it applies heavily to what we are doing at Passive Equity.

Many people love the concept of “Pay Yourself First” (popularized in “The Richest Man in Babylon” ~affiliate link~), but they don’t fully understand it.

“Pay Yourself First” does not mean take yourself out to dinner with your paycheck. It means putting money aside into an account that you never touch, even before you pay your creditors.

Once that account is large enough, it can go to work for you in passive income-producing assets such as private loans to real estate investors.

We’ve finished the rehab on Artemis, and boy does this house POP!

Vernon Bryant of BRC Consulting was the GC and he did a bang-up job.

If you were one of the investors that passed on this property when we sent it out, you will be kicking yourself!

You can click on each one of these pictures for a more detailed version so that you might marvel in the glory of the craftmanship!

We picked up this property for $45,500 and put $16,000 into the rehab. It’s now appraised conservatively at $92,000 and houses around the corner are selling in the $110′s!

This neighborhood rents for $950, so we are looking at $400 a month cashflow, even with a mortgage.

This is a great example of why you shouldn’t let ugly houses scare you!

Kiyosaki’s Definition of Wealth

Shauwn explains Robert Kiyosaki’s “definition of wealth” from his famous book “Rich Dad, Poor Dad.”

Most people think that wealth is a big pile of money, but Robert Kiyosaki says that this way of thinking has nothing to do with wealth.

Passive Income

Quit your job today, and how long could you live on passive income? Passive income is defined as interest from checking/savings accounts, dividends from stocks (not capital appreciation), cashflow from real estate…

These sources of income give you realized cash on a consistent basis and are relatively easy to maintain once you set them up.

Most people could only live a few hours on their passive income.. maybe a $100 or so or more.

Private Lending

Using this definition of wealth, you could go out and create a private loan to a real estate investor and begin making $500, $700, $1000 a month almost immediately.

Once you’ve created enough passive income to exceed your living expenses, you are independently wealthy.

According to Kiyosaki, you may have done more to retire yourself than you had in your entire working career!

1. Hard Money Lenders

Today I want to talk about how to find deals. A lot of people out there are telling you to do bandit signs, craigslist ads, to drive and network- and all of those things work. But there are several other ways to go about this that many people aren’t doing. It’s mainly networking and doing things like going out and meeting people like hard money lenders. Like I said before, look at their deals because they have investment property.

2. Banks

Also, go to the banks. Now, I’m not talking about Wells Fargo, or Citi, or any of those large big box banks, I’m talking about your local neighborhood banks. They loan money to individuals in the community and there’s an asset manager there. So go there, talk to the asset manager, and tell them about yourself- say “I’m a real estate investor, I’m buying property, and I can help you move these assets off your books very quickly. I use cash.” You don’t have to approach him for a loan, so don’t feel like you have to borrow money. Go there as a solution to their problems, because you’re going to help that asset manager out. So go to banks and go to hard money lenders.

3. Referrals

You can also get leads through referrals. Tell everyone about what you do. Go to everyone on your facebook, linked in, or whatever, and let them know that you buy property. I don’t know how many people have called me who I’ve been friends with for years who still don’t get that I invest in real estate. Well now that I’ve clearly described what I do and how I do it, I constantly get calls like “my neighbor has a property that they’re looking to sell. They’re moving, it’s been on the market for 60, 90, or 180 days and they can’t sell it. Would you mind going over there?” Yeah, I’ll go over and look at it. Now I’m a source for these people to get out of their problem.

So do different things. You can do all the standard items that you find on the internet- Craigslist, bandit signs, REI groups, but also think of other resources to help you drive your business. Think of your business as a wheel and you have to have several spokes coming in from lead sources to buy deals .

So start there, and think outside of the box. That’s the only way your business is going to grow.

Pulling the Trigger

Today I want to talk to you about what I think the number one reason people don’t buy investment property is- inability to pull the trigger. After 7 years of buying investment property, I still get those butterflies in my stomach when I’ve got a closing at 1:00 that I’ve got to go to and actually sign on the deal. Once you get over the idea that the butterflies are going to be there, that will put you on a pace to consistently buy properties, as you get past the fear of what you’re doing.

I have a guy that I’ve been mentoring in Central Texas, and he actually sat with Brian for 3 months before buying a property. This guy’s extremely smart- he’s a CPA by trade so he’s constantly got data and analyzing the deals. For three months he was planning out his 5 year plan, and had seen hundreds of deals but he could never pull the trigger. He said the other day that once he got past the fear of actually buying the property, he bought his first one the next day.

Buy Property!

So pulling the trigger on a property is what typically holds people back- they’re afraid to go out and do this even when they know that everything’s in line and all the homework they’ve done has worked out, and it’s going to benefit them to do this. They still can’t pull the trigger.

So, like Brian says “embrace the suck,” pull the trigger, get over it, and go out and buy property. You know what you’re doing. Just follow the key rules, have the right map, and go out and buy property.

I’ve been investing in real estate for over 7 years. Real estate changes so often and so fast that even now after doing this for 7 years I find myself constantly evaluating my business and how I’m operating it on a daily basis. Consider this- if you were just dropped in a city anywhere in the nation, what would you do to start you real estate investing business? There’s five things I would start with.

1. Bandit Signs

The first is building your team. Go out and drive around neighborhoods, picking the ones you’d like to invest in. When looking through neighborhoods, you’ll find bandit signs, those coroplast signs pasted on telephone poles or on stakes in people’s yards that say “we buy houses.” Call the numbers on these signs. These guys that say “we buy houses” are usually wholesalers who are selling property, so go out and start networking with them. Don’t look at these guys as competitors, but as team mates in the real estate game. They’ll have a list of buyers who you can wholesale property to or they’ll start sending you deals, and now you’re looking at the pipe line of properties moving around your city. So begin by calling the numbers on bandit signs, and finding guys who have deals.

2. Internet

Number two is Craigslist- use the internet. Everybody is putting property on the internet and selling houses- be it franchises or larger REI groups. Use sites like Craiglist, to find deals. Call those people just like you called the guys on the bandit signs. Just say “I’m brand new to the city, and I’d like to start buying or wholesaling property.”

3. Title Companies

Three, and this is kind of a ninja trick, is going to a title company. As you may know, title companies see everything. They see where all the invoices come from and who all the fees go out to. They know everyone who’s making money in real estate. Network with closers at title companies because they’ll tell you who is doing deals, and who’s moving property. From there you can get a list, so you can call and email those people. Then, you just start networking, and building your team.

4. REI Groups

Fourthly go to REI groups- you can go online to find a national REIA group. Start attending their events and rubbing elbows. A lot of times the wholesalers or property sellers from those bandit signs are going to be at these REI groups. Now you can put a face to a name and start building a rapport with these guys, these teammates of yours.

5. Hard Money Lenders

Your fifth resource will be hard money lenders. You may not want or need to borrow money from them, but these guys are loaning money on a daily basis to investors who buy property with equity in them. Often, things happen and they have to foreclose on these investors. Hard money lenders need to move their money to get these deals off their hands. So they’re going to be willing to sell these properties at a discount, to get them off their books in order loan money again. Because of this, they’re a good way to find property and network with other people who know about the market.

No matter what city you’re in, you can use these five resources to build your team, and get started investing in real estate.